Answer:
10.68%
Explanation:
Data provided in the question:
Returns on stock : 12%, 16%, 10%, 19%, 15%, -6%
Now,
Geometric average return on the stock is calculated as:
Geometric average return = [tex]({(1 + r_1)\times(1 + r_2).......\times(1 + r_n)})^\frac{1}{n}- 1[/tex]
Thus,
For the given returns on stock
Geometric average return
=[tex][ (1 + 0.12)\times(1 + 0.16)\times(1 + 0.10)\times(1 + 0.19)\times(1 + 0.15)\times(1 + (- 0.06)) ]^{\frac{1}{6}}-1[/tex]
= [tex][ 1.12\times1.16\times1.10\times1.19\times1.15\times0.94 ]^{\frac{1}{6}}-1[/tex]
= [tex][1.8384056768]^{\frac{1}{6}}-1[/tex]
= 1.1068 - 1
= 0.1068
or
= 0.1068 × 100%
= 10.68%
