In: Finance
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.
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 :)