What are the arithmetic and geometric average returns for a stock with annual returns of 4 percent,12 percent,-8 percent and 9 percent?
A)8.25%;6.25%
B)4.25%;4.89%
C)4.25%;3.96%
D)8.25%;7.89%
E)8.25%;8.21%

Question

Quizplus · Accepted Answer

Arithmetic average = (.04 + .12 - .08 + .09)/4 = .0425,or 4.25%Geometric return = (1.04 × 1.12 × .92 × 1.09)^.25 - 1 = .0396,or 3.96%

What Are the Arithmetic and Geometric Average Returns for a Stock