A stock had returns of 6%, 13%, -11%, and 17% over the past four years. What is the geometric average return for this time period?

A) 4.5%
B) 5.7%
C) 6.2%
D) 7.3%
E) 8.2%

Question

A stock had returns of 6%, 13%, -11%, and 17% over the past four years. What is the geometric average return for this time period?A)  4.5%B)  5.7%C)  6.2%D)  7.3%E)  8.2%

Bikash Hamal · Accepted Answer

Final Answer : B, Explanation :  To calculate the geometric average return, we use the formula [(1+r1) (1+r2) (1+r3) (1+r4)]^(1/4) - 1, where r1, r2, r3, and r4 are the annual returns for each year. Substituting in the values given, we get [(1+0.06) (1+0.13) (1-0.11) (1+0.17)]^(1/4) - 1 = 1.057 - 1 = 0.057, or 5.7%. Therefore, the correct choice is B.

A stock had returns of 6%, 13%, -11%, and 17% over the past four years. What is the geometric average return for this time period?

A) 4.5%
B) 5.7%
C) 6.2%
D) 7.3%
E) 8.2%

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