What Are the Geometric and Arithmetic Average Returns for a Stock

question 297

Multiple Choice

What are the geometric and arithmetic average returns for a stock with annual returns of 5%, 10%, -8%, and 16%?

• A) 5.37%; 5.75%
• B) 6.49%; 7.67%
• C) 7.22%; 5.75%
• D) 7.22%; 7.67%
• E) 9.68%; 5.75%

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Definitions:

Deviations

Differences between observed values and the average or expected values in a data set.

Median

The middle value of a data set, where half the numbers are below and half are above this value.

Mean

The average of a set of numbers, calculated by summing all the numbers and then dividing by the count of those numbers.

Frequency Distribution

A summary of data showing how often each value occurs.