Question

Calculate geometric average rate of return of the stock given below by using its historical return series

Year	stock price(TL)	Return(%)
2014	200
2015	300
2016	420
2017	336

Answer 1

Year	Stock Price
2014	200
2015	300
2016	420
2017	336

% Return is calculated using the formula:

(New Price-Old price)/Old price

% return in 2015 = (300-200)/200 = 50%

% return in 2015 = (420-300)/300 = 40%

% return in 2015 = (336-420)/420 = -20%

Year	Stock Price	Return %
2014	200
2015	300	50%
2016	420	40%
2017	336	-20%

Geometric Average rate of return of the stock formula is:

For n = 3

Therefore geometric average mean of the stock =(1.5*1.4*0.8)^1/3-1 = 1.18878439055263-1 = 18.88%

Answer -> 18.88% (approx.)