A stock has annual returns of 6 percent, 14 percent, -3 percent, and 2 percent for the past four years.

A stock has annual returns of 6 percent, 14 percent, -3 percent, and 2 percent for the past four years. The arithmetic average of these returns is _____ percent while the geometric average return for the period is _____ percent.    A.  4.57; 4.75 B.  4.75; 4.57 C.  6.33; 6.19 D.  6.19; 6.33 E.  6.33; 6.33 Arithmetic average = (0.06 + 0.14 - 0.03 + 0.02)/4 = 4.75 percent Geometric return = (1.06 × 1.14 × 0.97 × 1.02).25 - 1 = 4.57 percent

78.

A stock has annual returns of 5 percent, 21 percent, -12 percent, 7 percent, and -6 percent for the past five years. The arithmetic average of these returns is _____ percent while the geometric average return for the period is _____ percent.    A.  3.89; 3.62 B.  3.89; 4.60 C.  3.62; 3.89 D.  4.60; 3.62 E.  4.60; 3.89 Arithmetic average = (0.05 + 0.21- 0.12 + 0.07 - 0.06)/5 = 3.00 percent Geometric return = (1.05 × 1.21 × 0.88 × 1.07 × 0.94).20 - 1 = 2.37 percent

79.

A stock had returns of 16 percent, 4 percent, 8 percent, 14 percent, -9 percent, and -5 percent over the past six years. What is the geometric average return for this time period?    A.  4.26 percent B.  4.67 percent C.  5.13 percent D.  5.39 percent E.  5.60 percent Geometric average = (1.16 × 1.04 × 1.08 × 1.14 × 0.91 × 0.95)1/6 - 1 = 4.26 percent

80.

A stock had the following prices and dividends. What is the geometric average return on this stock?        A.  -15.87 percent B.  -13.71 percent C.  -13.33 percent D.  -12.91 percent E.  -11.48 percent Return for year 2 = ($16.10 - $16.40 + $0.50)/$16.40 = 1.2195 percent Return for year 3 = ($15.48 - $16.10 + $0.50)/$16.10 = -0.7453 percent Return for year 4 = ($9.15 - $15.48 + $0.75)/$15.48 = -36.0465 percent Geometric return = (1.012195 × 0.9925472 × 0.639535)1/3 - 1 = -13.71 percent