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28 January, 16:44

A stock has had returns of 14 percent, 32 percent, 15 percent, - 20 percent, 32 percent, and - 7 percent over the last six years. what are the arithmetic and geometric returns for the stock? (do not round intermediate calculations. enter your answers as a percent rounded to 2 decimal places,

e. g., 32.16.)

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  1. 28 January, 19:52
    0
    The correct answer is 11% and 9.24%.

    Explanation:

    According to the scenario, the computation of the given data are as follows:

    Arithmetic return=[ r1 + r2 + r3 + r4 + r5 + r6 ] : 6

    By putting the value we get,

    = [0.14 + 0.32 + 0.15 - 0.20 + 0.32 - 0.07 ] : 6

    =0.66 : 6

    =0.11 or 11%

    Geometric Return = [ (1+r1) (1+r2) (1 + r3) (1 + r4) (1 + r5) (1 + r6]^1:6 - 1

    By putting the value, we get

    =[ (1+0.14) (1+0.32) (1+0.15) (1-0.20) (1+0.32) (1-0.07) ]^1:6 - 1

    =[1.14 * 1.32 * 1.15 * 0.80 * 1.32 * 0.93]^1:6 - 1

    =[16.9950]^1:6 - 1

    =0.9241 or 9.24%
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