Question

In: Finance

A stock has had returns of 10 percent, 8 percent, -25 percent over the last three...

A stock has had returns of 10 percent, 8 percent, -25 percent over the last three years, respectively. What is the geometric mean return for this stock?(Enter your answers as a percentage rounded to 2 decimal places. For example, enter 8.43% instead of 0.0843 )

Answer: Units:

Solutions

Expert Solution

Geometric mean return = [(1 + r1) × (1 + r2) × (1 + r3)]^1/3 − 1

Geometric mean return = [(1 + 0.10) × (1 + 0.08) × (1 - 0.25)]^(1/3) - 1

Geometric mean return = -0.0377 or -3.77%


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