If an investor buys a stock and holds it for three years, earning 15% for the first year; negative 15% for the second; and 12% for the third, what was the annual geometric return?
A) 3.1%
B) 3.75%
C) 4.11%
D) 5.66%

Question

Quizplus · Accepted Answer

The annual geometric return is calculated by taking the product of the returns for each year, raising it to the power of 1/n (where n is the number of years), and subtracting 1. The calculation is: [(1.15) * (0.85) * (1.12)]^(1/3) - 1 = 3.1%.

If an Investor Buys a Stock and Holds It for Three