The Value Line Index is an equally weighted geometric average of the return of about 1,700 firms.What is the value of an index based on the geometric average returns of three stocks,where the returns on the three stocks during a given period were 20%,-10%,and 5%?
A) 4.3%
B) 5.0%
C) 11.7%
D) 13.4%
E) 12.2%

Question

Quizplus · Accepted Answer

The geometric average return is calculated as [(1+0.20) * (1-0.10) * (1+0.05)]^(1/3) - 1 = 4.3%.

The Value Line Index Is an Equally Weighted Geometric Average