What are the arithmetic and geometric average returns for a stock with annual returns of:__________.
a) 4%,
b) 9%,
c) -6%,
d) 18%

Answers

Answer 1

Answer:

Arithmetic average return = 6.25%

Geometric average return = 5.89%

Explanation:

Annual returns of 4%,  9%,  -6% and  18%

Arithmetic average return of the stock = ∑ 4%,9%,-6%,and 18% / n

= 25%/4

= 6.25%

Geometric average return formula = x1,*x2*x3 .....^1/n  - 1

Geometric average return = 1.04*1.09*(1-0.06)*1.18^1/4 -1

Geometric average return = 1.04*1.09*0.94*1.18^1/4 - 1

Geometric average return  = 1.25789^1/4-1

Geometric average return = 1.0589 - 1

Geometric average return = 0.0589

Geometric average return = 5.89%


Related Questions

review financial website or publications and three examples of a bond. for each bond gather the following information and complete the table coupon rate selling price maturity date​

Answers

Answer:

Company Coupon Rate Selling Price Maturity Date

Bombardier Inc. 7.5% $96.40 3/15/2025

NGL Energy Partners LP 6.875% $97.50 10/15/2021

Disney 2.150% $101.45 9/17/2020

Explanation:

from the Plato

The Coupon Rate, Selling Price and Maturity Date are important terms in a bond contract.

What are the bonds terms?

The coupon rate is the yield that determines the amount that an investor is expected to receive, the selling price is the present value of the cash amounts that will received by the bond owner and the maturity date is the date at which the bond will mature for full repayment.

The gathered information from the financial website includes:

Company                        Coupon Rate   Selling Price    Maturity Date

Bombardier Inc.                   7.5%                $96.40            3/15/2025

NGL Energy Partners LP     6.875%            $97.50            10/15/2021

Disney                                  2.150%             $101.45            9/17/2020

Read more about bonds

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