The following are annual rates of return on AT&T Inc. overfive years.Year Return (%)...

The following are annual rates of return on AT&T Inc. over five years.

Year Return (%)

2014 (-4.23)

2015 (-1.2)

2016 (9.54)

2017 (16.92)

2018 (-11.17)

a. What is the arithmetic average return for AT&T Inc.? 1.97

b. What is the geometric average return for AT&T Inc.? 1.48

Enter your answers as a percent rounded to two decimal places. Do not put the % sign.

Solutions

Expert Solution

1. For Calculation of arithmetic mean we use the formula

AM = (Hpr 1+ Hpr2 +.....Hpr n )/ n

Here we get

AM = Sum is 9.86/ 5 = 1.972 percentage .

Its Correct :)

2. For GM use the formula

GM = ((1+hpr1)(1+hpr2).....n)^(1/n) -1

We get

=1.0148-1 = 0.0148 or 1.48 percentage is answer

Its correct :)

jeff jeffy answered 2 years ago

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