What are the arithmetic and geometric average returns for a stock with annual returns of 11 percent,14 percent,-2 percent and 6 percent?
A)8.25%;8.15%
B)8.25%;7.89%
C)7.25%;7.37%
D)7.25%;8.15%
E)7.25%;7.08%

Question

Quizplus · Accepted Answer

Arithmetic average = (.11 + .14 - .02 + .06)/4 = .0725,or 7.25%Geometric return = (1.11 × 1.14 × .98 × 1.06)^.25 - 1 = .0708,or 7.08%

What Are the Arithmetic and Geometric Average Returns for a Stock