Caswell Enterprise had the following end-of-year stock prices over the last five years and paid no cash
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Question:
Caswell Enterprise 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 rates of return for each year from this information.
b. What is the arithmetic average rate of return earned by investing in Caswell stock over this period?
c. What is the geometric average rate of return earned by investing in Caswell 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 (the arithmetic or geometric) better describes the average annual rate of return earned over the period.
Related Book For
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown
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