In the past four years, the annual returns of one company’s stock are 12%, 18%, and –14%, and 7%. a) What is the geometric average return? [5 marks] b) What is the arithmetic average of the returns? [5 marks] c) According to an economist’ forecast on the Year 2020, the probabilities of repeating the performances of the former four years are 30%, 30%, 20%, and 20%, respectively. What is the expected return of the stock in the Year 2020? [5 marks]

/in /by

In the past four years, the annual returns of one company’s stock
are 12%, 18%, and –14%, and 7%.
a) What is the geometric average return? [5 marks]
b) What is the arithmetic average of the returns? [5 marks]
c) According to an economist’ forecast on the Year 2020, the probabilities of repeating
the performances of the former four years are 30%, 30%, 20%, and 20%, respectively.
What is the expected return of the stock in the Year 2020? [5 marks]

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