What is the annual geometric return for an investor who invests in a stock for 2 years if he earned 18% the first year and a negative 8% for the second?
A) 2.15%
B) 3.75%
C) 4.11%
D) 4.19%

Question

Quizplus · Accepted Answer

The annual geometric return is calculated using the formula:Geometric Return = (1 + Return in Year 1) * (1 + Return in Year 2) - 1In this case, the return in Year 1 is 18% and the return in Year 2 is -8%.Therefore, the annual geometric return is:Geometric Return = (1 + 0.18) * (1 - 0.08) - 1= 1.18 * 0.92 - 1= 0.0419 or 4.19%

What Is the Annual Geometric Return for an Investor Who