Question

Caswell Enterprises had the following end-of-year stock prices over the last five years and paid no cash dividends:
Time Caswell
1 ........ $10
2 ........ 15
3 ........ 12
4 ........ 9
5 ........ 10
a. Calculate the annual rate returns for each year from this information.
b. What is the arithmetic average rate of return earned by investing in Caswell’s stock over this period?
c. What is the geometric average rate of return earned by investing in Caswell’s stock over this period?
d. Considering that the beginning and ending stock prices for the five-year period are the same, which type of average rate of return best describes the average annual rate of return earned over the period (the arithmetic or geometric)?



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  • CreatedOctober 31, 2014
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