The stock price in KMW,Inc.is $50,$54,$56,and $48 on four consecutive days of trading.What is the continuously compounded return on the stock over this time frame?
A) -3.85 %
B) -4.00 %
C) -4.08 %
D) -4.16 %

Question

Quizplus · Accepted Answer

To find the continuously compounded return, we can use the formula:

r = ln(Pn/P0) / n

where Pn is the ending price, P0 is the starting price, and n is the number of periods. Here, we have:

P0 = $50
Pn = $48
n = 4

r = ln($48/$50) / 4
  = -0.0408

So the continuously compounded return is -4.08%, which corresponds to choice C.

The Stock Price in KMW,Inc