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worty [1.4K]
3 years ago
7

A stock has had the following year-end prices and dividends:

Business
1 answer:
bagirrra123 [75]3 years ago
3 0

Answer:

Year       Price        Dividend           Return

1             43.31               -                       -

2           48.29           0.51                   12.68%

3            57.21           0.54                  19.59%

4           45.29           0.60                 -19.89%

5           52.21            0.65                  16.71%

6           61.29            0.73                 18.79%

arithmetic returns basically refer to the mean (or average) of the returns = (12.68% + 19.59% - 19.89% + 16.71% + 18.79%) / 5 = 47.88% / 5 = 9.58%

geometric returns involves multiplying the returns and then squaring them = ⁵√(1.1268 x 1.1959 x 0.8011 x 1.1671 x 1.1879) - 1 = 1.0840 - 1 = 0.084 = 8.40%

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