Cindy in vested in a small stock whose price was $5.60. The following table shows the prices of the stock at the end of the first year, second year, and so on. Year Price ($) 1 7.71 2 7.07 3 14.41 4 21.71 5 14.71 Calculate the arithmetic mean rate of return and the geometric mean rate of return of the stock.

EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter5: The Cost Of Money (interest Rates)
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4.12 Cindy in vested in a small stock whose price was $5.60. The following table shows the prices of the stock at the end of the first year, second year, and so on.

Year

Price ($)

1

7.71

2

7.07

3

14.41

4

21.71

5

14.71

Calculate the arithmetic mean rate of return and the geometric mean rate of return of the stock.

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