An investment advisor is considering recommending the stock

An investment advisor is considering recommending the stock of company X, where the growth rates for the stock’s price for the last 4 years are as follows: 6.18% , 11.27%, -3.14%, -2.72%

What is the (geometric) mean growth rate over this period?

the answer should be 2.718% but idk how to get this answer

Solution

Answer:

To get the geometric mean growth rate over this period:

Step one : convert the growth rates into decimal numbers as they are given in percentage

Step two : apply the formula of geometric mean

GM = n?a1,a2,a3,a4…..an

Or (a1,a2,a3,a4….an) ^ 1/n

Where n = number of years given

           a= growth rate

step three: put the values in the formula and calculate you will get the answer and then convert it into the percentage