Sign Up

Sign Up to our social questions and Answers Engine to ask questions, answer people’s questions, and connect with other people.

Have an account? Sign In

Have an account? Sign In Now

Sign In

Login to our social questions & Answers Engine to ask questions answer people’s questions & connect with other people.

Sign Up Here

Forgot Password?

Don't have account, Sign Up Here

Forgot Password

Lost your password? Please enter your email address. You will receive a link and will create a new password via email.

Have an account? Sign In Now

You must login to ask question.(5)

Forgot Password?

Need An Account, Sign Up Here

Please briefly explain why you feel this question should be reported.

Please briefly explain why you feel this answer should be reported.

Please briefly explain why you feel this user should be reported.

Sign InSign Up

ITtutoria

ITtutoria Logo ITtutoria Logo

ITtutoria Navigation

  • Python
  • Java
  • Reactjs
  • JavaScript
  • R
  • PySpark
  • MYSQL
  • Pandas
  • QA
  • C++
Ask A Question

Mobile menu

Close
Ask a Question
  • Home
  • Python
  • Science
  • Java
  • JavaScript
  • Reactjs
  • Nodejs
  • Tools
  • QA
Home/ Questions/A stock has had the following year-end prices and dividends
Next
Answered
kttutoria
  • 19
kttutoriaExpert
Asked: April 13, 20222022-04-13T03:37:55+00:00 2022-04-13T03:37:55+00:00In: finance

A stock has had the following year-end prices and dividends

  • 19

. Advertisement .

..3..

. Advertisement .

..4..

A stock has had the following year-end prices and dividends:

Year Price Dividend
0 $ 14.75 —
1 16.93 $ .15
2 17.93 .24
3 16.43 .28
4 18.77 .29
5 21.88 .34

What are the arithmetic and geometric returns for the stock? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the “%” sign in your response.)

  Arithmetic returns %
  Geometric returns %

♦ Relevant knowledge
There are two kinds of returns: Arithmetic Returns (AR) and Geometric Returns (GR) both are used to define the historical returns of a particular stock or portfolio. The main difference between these two types of returns can be seen below:

To determine the AR to calculate the AR, we first use the count of returns (specifically the series, such as monthly, daily, annually and so on)) and add them all up, and finally divide the sum times the total returns of the particular series.

 

geometric returns
  • 2 2 Answers
  • 63 Views
  • 0 Followers
  • 0
Answer
Share
  • Facebook
  • Report

2 Answers

  • Voted
  • Oldest
  • Recent
  • Random
  1. Best Answer
    kttutoria Expert
    2022-04-23T17:59:27+00:00Added an answer on April 23, 2022 at 5:59 pm

    Year 0 – year 1:

    Rate of return, r1 = (Closing price + Dividend + Opening price)/ Opening price Rate of return,

    r1= ($16.93 + $0.15- $14.75)/ $14.75
    Rate of Return = 0.1580

    Year 1 – Year 2.

    Rate of Return, R2 = (Closing price + Dividend – Opening price) / Opening price
    Rate of Return, R2 = ($17.93 + 0.24 – $16.93), / $16.93
    Rate of Return = 0.0732

    Year 2 – Year 3.

    Rate of Return, R3 = (Closing price + Dividend – Opening price) / Opening price
    Rate of Return, R3 = ($16.43 + 0.28 – $17.93), / $17.93
    Rate of Return = -0.0680

    Year 3 – Year 4.

    Rate of Return, R4 = (Closing price + Dividend – Opening price) / Opening price
    Rate of Return = r4 = ($18.77 + 0.29 – $16.43)/ $16.43
    Rate of Return = 0.1601

    Year 4 – Year 5.

    Rate of Return, R5 = (Closing price + Dividend – Opening Price)/Opening Price
    Rate of Return, R5 = (21.88 + $0.34- $18.77)/ $18.77
    Rate of Return, R5 = 0.1838

    Arithmetic Return = [r1+r2+r3+r4+r5] / 5.
    Arithmetic Return = [0.1580+ 0.0732 + (+0.0680) + (0.1601 + 0.1838]/ 5.
    Arithmetic Return = 0.5071/5
    Arithmetic Return = 0.1014 / 10.14%

    Geometric Return = (1+r1) * (1+r2)* (1+r3) * (1)+r4) * (1+r4) • (1+r5 1/5)
    Geometric Return = [1+0.1580] * (1+0.0732) * (1+0.1601) * (1+0.1601) * (1+0.1680) * (1+0.1601) – 1

    Geometric Return = 1.5906656 (1/5) – 1
    Geometric Return = 1.0973-1
    Geometric Return = 0.0973 / 9.73%

     

    • 10
    • Reply
    • Share
      Share
      • Share on Facebook
      • Share on Twitter
      • Share on LinkedIn
      • Share on WhatsApp
      • Report
  2. Joseph Davis
    2022-04-13T03:37:58+00:00Added an answer on April 13, 2022 at 3:37 am

    Year 0 – year 1:

    Rate of return, r1 = (Closing price + Dividend + Opening price)/ Opening price Rate of return, r1= ($16.93 + $0.15- $14.75)/ $14.75

    Rate of Return = 0.1580

    Year 1 – Year 2.

    Rate of Return, R2 = (Closing price + Dividend – Opening price) / Opening price

    Rate of Return, R2 = ($17.93 + 0.24 – $16.93), / $16.93

    Rate of Return = 0.0732

    Year 2 – Year 3.

    Rate of Return, R3 = (Closing price + Dividend – Opening price) / Opening price

    Rate of Return, R3 = ($16.43 + 0.28 – $17.93), / $17.93

    Rate of Return = -0.0680

    Year 3 – Year 4.

    Rate of Return, R4 = (Closing price + Dividend – Opening price) / Opening price

    Rate of Return = r4 = ($18.77 + 0.29 – $16.43)/ $16.43

    Rate of Return = 0.1601

    Year 4 – Year 5.

    Rate of Return, R5 = (Closing price + Dividend – Opening Price)/Opening Price

    Rate of Return, R5 = (21.88 + $0.34- $18.77)/ $18.77

    Rate of Return, R5 = 0.1838

    Arithmetic Return = [r1+r2+r3+r4+r5] / 5.

    Arithmetic Return = [0.1580+ 0.0732 + (+0.0680) + (0.1601 + 0.1838]/ 5.

    Arithmetic Return = 0.5071/5

    Arithmetic Return = 0.1014 / 10.14%

    Geometric Return = (1+r1) * (1+r2)* (1+r3) * (1)+r4) * (1+r4) • (1+r5 1/5)

    Geometric Return = [1+0.1580] * (1+0.0732) * (1+0.1601) * (1+0.1601) * (1+0.1680) * (1+0.1601) – 1

    Geometric Return = 1.5906656 (1/5) – 1

    Geometric Return = 1.0973-1

    Geometric Return = 0.0973 / 9.73%

    • 22
    • Reply
    • Share
      Share
      • Share on Facebook
      • Share on Twitter
      • Share on LinkedIn
      • Share on WhatsApp
      • Report

Leave an answer
Cancel reply

You must login to add an answer.

Forgot Password?

Need An Account, Sign Up Here

Sidebar

Ask A Question
  • How to Split String by space in C++
  • How To Convert A Pandas DataFrame Column To A List
  • How to Replace Multiple Characters in A String in Python?
  • How To Remove Special Characters From String Python

Explore

  • Home
  • Tutorial

Footer

ITtutoria

ITtutoria

This website is user friendly and will facilitate transferring knowledge. It would be useful for a self-initiated learning process.

@ ITTutoria Co Ltd.

Tutorial

  • Home
  • Python
  • Science
  • Java
  • JavaScript
  • Reactjs
  • Nodejs
  • Tools
  • QA

Legal Stuff

  • About Us
  • Terms of Use
  • Privacy Policy
  • Contact Us

DMCA.com Protection Status

Help

  • Knowledge Base
  • Support

Follow

© 2022 Ittutoria. All Rights Reserved.

Insert/edit link

Enter the destination URL

Or link to existing content

    No search term specified. Showing recent items. Search or use up and down arrow keys to select an item.