What are the arithmetic and geometric average returns for a stock with annual returns of 6.2 percent,12.8 percent,−7.7 percent,and 9.4 percent?
A)5.175%; 5.028%
B)6.256%; 4.892%
C)5.175%; 4.873%
D)6.256%; 5.028%
E)6.900%; 4.873%

Question

Quizplus · Accepted Answer

Arithmetic average = (0.062 + 0.128 − 0.077 + 0.094)/ 4 = 0.05175,or 5.175% Geometric return = (1.062 × 1.128 × 0.923 × 1.094)^.25 − 1 = 0.04873,or 4.873%

What Are the Arithmetic and Geometric Average Returns for a Stock