The one-year holding period returns for Cherokee Adventures for 2010 and 2011 are given below.If Cherokee's geometric average return for 2010 through 2012 was 15 percent, what was its implied one-year holding period return for 2012?
A) 12.8%
B) 11.8%
C) 24.6%
D) 16.0%
E) Not enough information is given to answer this question.

Question

The one-year holding period returns for Cherokee Adventures for 2010 and 2011 are given below.If Cherokee's geometric average return for 2010 through 2012 was 15 percent, what was its implied one-year holding period return for 2012? 
A) 12.8% 
B) 11.8% 
C) 24.6% 
D) 16.0% 
E) Not enough information is given to answer this question.

Quizplus · Accepted Answer

To find the implied one-year holding period return for 2012, we need to use the formula:
Geometric average return = [(1+ Holding period return for year 1) * (1 + Holding period return for year 2) * (1 + Holding period return for year 3)] ^ (1/3) - 1

Substituting the values given, we get:
15% = [(1 + 17%) * (1 + (-10%)) * (1 + X)] ^ (1/3) - 1
Solving for X, we get X = 24.6%
Therefore, the implied one-year holding period return for 2012 is 24.6% (option C).

The One-Year Holding Period Returns for Cherokee Adventures for 2010