Question

The Value Line Index is an equally-weighted geometric average of the returns of about 1,700 firms. 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 32%, 5%, and -10%, respectively, is

Multiple Choice

• 4.3%.

• 7.6%.

• 9.0%.

• 13.4%.

• 5.0%.

Answer 1

- Return of three stocks in given period is 32%, 5% and -10%

Calculating the Geometric Average Return of three stocks:-

Geometric Average Return = 1.076 - 1

Geometric Average Return = 7.6%

Option 2

If you need any clarification, you can ask in comments.    

If you like my answer, then please up-vote as it will be motivating