The return pattern on your favorite stock has been 5%,8%,-12%,15%,21% over the last five years. What has been your average return and holding period return over the last 5 years?
A) 4.5%; 6.5%
B) 7.4%; 38.9%
C) 7.4%; 7.76%
D) 7.4%; 76.73%
E) None of these.

Question

Quizplus · Accepted Answer

The average return is calculated by taking the sum of the returns and dividing by the number of years: (5% + 8% - 12% + 15% + 21%) / 5 = 7.4%. The holding period return is calculated by multiplying the returns for each year: (1.05 * 1.08 * 0.88 * 1.15 * 1.21) - 1 = 38.9%.

The Return Pattern on Your Favorite Stock Has Been 5%,8%,-12%,15%,21