A stock has had returns of 19 percent, 13 percent, 19 percent, 5 percent, 19 per

Question

A stock has had returns of 19 percent, 13 percent, 19 percent, 5 percent, 19 percent, and 9 percent over the last six years. The arithmetic and geometric returns for the stock are percent and percent, respectively. (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16))

A stock has had returns of 19 percent, 13 percent, 19 percent, 5 percent, 19 percent, and 9 percent over the last six years. The arithmetic and geometric returns for the stock are percent and percent, respectively. (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16))

Explanation / Answer

arithmetic is just add them up and divide (19+13+19+5+19+9) / 6=14 geometric is more complicated: nth root of ((1+return)*(1+return)etc)-1 so 6th root of (1.19*1.13*1.19*1.05*1.19*1.09) (1.19*1.13*1.19*1.05*1.19*1.09)^(1/6)-1=13.86

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