What is the geometric average return over one year if the quarterly returns are 8%,9%,5%,and 12%,respectively?
A) 8.00%
B) 8.33 %
C) 8.47%
D) 8.50 %

Question

Quizplus · Accepted Answer

To find the geometric mean return over one year given quarterly returns, we can use the following formula:

Geometric mean return = [(1+Q1) × (1+Q2) × (1+Q3) × (1+Q4)]^(1/4) - 1

Where Q1-Q4 represent the quarterly returns.

Substituting the given quarterly returns, we get:

Geometric mean return = [(1+0.08) × (1+0.09) × (1+0.05) × (1+0.12)]^(1/4) - 1

= (1.2436)^(1/4) -1

= 0.0847 or 8.47%

Therefore, the best choice is (C).

What Is the Geometric Average Return Over One Year If