The return pattern on your favorite stock has been 7%,10%,-14%,10%,16% over the last five years.What has your average return and holding period return over the last 5 years?
A)5.8%; 5.8%
B)5.8%; 29.2%
C)9.4%; 7.2%
D)9.4%; 35.8%
E)None of the above.

Question

Quizplus · Accepted Answer

The average return is the arithmetic mean: (7% + 10% - 14% + 10% + 16%) / 5 = 5.8%. The holding period return is the cumulative return: (1.07 * 1.10 * 0.86 * 1.10 * 1.16 - 1) * 100 = 29.2%.

The Return Pattern on Your Favorite Stock Has Been 7%,10%,-14%,10%,16