Investment question?

0 ⤊

Investment question?

Does anyone know how to calculate the geometric average of the following historical returns:
Yr. 1 22.0%
Yr. 2 28.0%
Yr. 3 -1.5%
Yr. 4 3.0%
Yr. 5 10.0%

2007-03-19 06:04:21 · 2 answers · asked by Munch_101 1 in Business & Finance ➔ Investing

2 answers

Add one to each one and multiply them together to get a total return. Then raise the answer to 1/5 and subtract 1 to get the geometric average.

1.22*1.28*0.985*1.03*1.10=1.74

1.74^(1/5)-1 = 11.75%

2007-03-19 06:19:18 · answer #1 · answered by BosCFA 5 · 0⤊ 0⤋

MSDC forgot to add the last part. Take the 1.7428 to the 1/5 power. The answer would be 11.75%.

2007-03-19 13:25:20 · answer #2 · answered by Ron 3 · 0⤊ 0⤋