Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $360,000 and credit sa
1 answer:
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Answer:
Arithmetic average rate of return = 9.30 %
geometric average annual rate of return = 8.58%
correct option is A 9.30 % and 8.58%
Explanation:
given data
beginning share price = $50
time = 3 year
end year 1 prices = $62
end year 2 prices = $58
end year 3 prices = $64
to find out
arithmetic average annual rate of return and the geometric average annual rate of return
solution
we get here return for each period that is express as
Period 1 = ...........1
Period 1 =
Period 1 = 24%
and
Period 2 =
Period 2 = Period 1 =
Period 2 = -6.45%
and
Period 3 =
Period 3 =
Period 3 = 10.34%
so
here Arithmetic average rate of return will be
Arithmetic average rate of return = (24% + -6.45% + 10.34%) ÷ 3
Arithmetic average rate of return = 9.30%
and
geometric average annual rate of return will be here as
geometric average annual rate of return = - 1 ................2
geometric average annual rate of return = - 1
geometric average annual rate of return = 8.58%