What are the arithmetic and geometric average returns for a share with annual returns of 4%, 9%, -6%, and 18%?
A)5.89%; 6.25%
B)6.25%; 5.89%
C)6.25%; 8.33%
D)8.3%; 5.89%
E)8.3%; 6.25%

Question

Quizplus · Accepted Answer

Arithmetic average return = (4% + 9% - 6% + 18%)/4 = 6.25%
Geometric average return = [(1+4%)(1+9%)(1-6%)(1+18%)]^(1/4) - 1 = 5.89% 
Therefore, option B is the correct choice as it provides both answers correctly.

What Are the Arithmetic and Geometric Average Returns for a Share