Question

A stock had returns of 14 percent, 11 percent, 19 percent, 20 percent, 13 percent, and...

A stock had returns of 14 percent, 11 percent, 19 percent, 20 percent, 13 percent, and -7 percent over the last six years.

  

Required:
(a) What is the arithmetic return for the stock?

  

(b) What is the geometric return for the stock?

   

  

Requirement 3:
If the inflation rate last year was 8 percent, what was your total real rate of return on this investment? (Do not round intermediate calculations.)
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer to Question 1:

Requirement A:

Arithmetic Return = [r1 + r2 + r3 + r4 + r5 + r6] / 6
Arithmetic Return = [0.14 + 0.11 + 0.19 + 0.20 + 0.13 + (-0.07)] / 6
Arithmetic Return = 0.70 / 6
Arithmetic Return = 0.1167 or 11.67%

Requirement B:

Geometric Return = [(1+r1) * (1+r2) * (1+r3) * (1+r4) * (1+r5) * (1+r6)]^(1/6) - 1
Geometric Return = [(1+0.14) * (1+0.11) * (1+0.19) * (1+0.20) * (1+0.13) * (1-0.07)]^(1/6) - 1
Geometric Return = 1.898967^(1/6) - 1
Geometric Return = 1.1128 - 1
Geometric Return = 0.1128 or 11.28%

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A stock had returns of 19 percent, 14 percent, 12 percent, -4 percent, 17 percent, and...
A stock had returns of 19 percent, 14 percent, 12 percent, -4 percent, 17 percent, and 7 percent over the last six years. What is the arithmetic return for the stock? What is the geometric return for the stock?
A stock has had returns of 12 percent, 19 percent, 21 percent, 21 percent, -12 percent,...
A stock has had returns of 12 percent, 19 percent, 21 percent, 21 percent, -12 percent, 26 percent, and -5 percent over the last six years. What are the arithmetic and geometric returns for the stock? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places.) a.) Arithmetic return? b) Geometric return?
A stock had returns of 16 percent, 12 percent, 19 percent, 17 percent, 18 percent, and...
A stock had returns of 16 percent, 12 percent, 19 percent, 17 percent, 18 percent, and -1 percent over the last six years.    What is the arithmetic return for the stock?    What is the geometric return for the stock?
A stock had returns of 15 percent, 14 percent, 18 percent, 5 percent, 16 percent, and...
A stock had returns of 15 percent, 14 percent, 18 percent, 5 percent, 16 percent, and 2 percent over the last six years. What is the arithmetic return for the stock? What is the geometric return for the stock?
You find a certain stock that had returns of 14 percent, -11 percent, 21 percent, and...
You find a certain stock that had returns of 14 percent, -11 percent, 21 percent, and 22 percent for four of the last five years. The average return of the stock over this period was 12 percent. What was the stock's return for the missing year? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places.) What is the standard deviation of the stock's returns? ( DO not round intermediate calculations and enter...
A stock has had returns of 8 percent, 10 percent, 20 percent, -12 percent, and 24...
A stock has had returns of 8 percent, 10 percent, 20 percent, -12 percent, and 24 percent over the last five years. Answer questions 32 - 33 What is the geometric return for the stock? What is the standard deviation of this stock?
Financial management question A stock has had returns of 6 percent, 10 percent, 21 percent, -14...
Financial management question A stock has had returns of 6 percent, 10 percent, 21 percent, -14 percent, and 25 percent over the last five years. 1. What is the geometric return for the stock? 2. What is the standard deviation of this stock?
You’ve observed the following returns on SkyNet Data Corporation’s stock over the past five years: 19...
You’ve observed the following returns on SkyNet Data Corporation’s stock over the past five years: 19 percent, 24 percent, 11 percent, −9 percent, and 13 percent.      a.What was the arithmetic average return on the company’s stock over this 5-year period?      b.What was the variance of the company’s returns over this period? The standard deviation? Suppose the average inflation rate over this period was 3.6 percent and the average T-bill rate over the period was 4.1 percent.      c.What...
Question 22 You find a certain stock that had returns of 14 percent, -15 percent, 20...
Question 22 You find a certain stock that had returns of 14 percent, -15 percent, 20 percent, and -12 percent for four of the last five years. The average return of the stock over this period was 6.5 percent. What is the standard deviation of the stock's returns? Group of answer choices 15.3 percent 16.8 percent 18.7 percent 19.3 percent 20.3 percent
A stock produced returns of 14 percent, 17 percent, and −10 percent over three of the...
A stock produced returns of 14 percent, 17 percent, and −10 percent over three of the past four years, respectively. The arithmetic average for the past four years is 6 percent. Show you work here (be as detailed and organized as possible): What is the missing return (i.e., the return in the fourth year)? What is the geometric average return over the four years? What is the standard deviation of returns of the stock? Show your work clearly below.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT