Homework SourseA stock has had the following yearend prices and dividends W
A stock has had the following year-end prices and dividends:
What are the arithmetic and geometric returns for the stock? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
| Year | Price | Dividend | |||||
| 1 | $ | 43.19 | - | ||||
| 2 | 48.17 | $ | 0.33 | ||||
| 3 | 57.09 | 0.36 | |||||
| 4 | 45.17 | 0.55 | |||||
| 5 | 52.09 | 0.60 | |||||
| 6 | 61.17 | 0.68 | |||||
Solution
Solution:
Arithmetic return =
Arithmetic mean = Sum of returns / Number of years = 7.84 %
Gemetric Mean = Square root 6 times of ( ( 1+ r1) *( 1+ r2) *( 1+ r3)* ( 1+ r4) *( 1+ r5) * ( 1+ r6) ) - 1
= 6.8%
| Years | Returns=ending pric - Initial price + Dividend received / Initial Price |
| 1 | = 43.19 - 0 -0 / Not Given= 0 |
| 2 | = 48.17 - 43.19 - +0.33 / 43.19 = 12.29 % |
| 3 | = 57.09 - 48.17 + 0.36 / 48.17 = 19.27 % |
| 4 | = 45.17 -57.09 + 0.55/57.09 = -19.92% |
| 5 | = 52.09 - 45.17 + 0.60 / 45.17 = 16.65 % |
| 6 | = 61.17 - 52.09 + 0.68/ 52.09 = 18.74 % |
