Q12.

Determine geometric average return from the following numbers:

Year 2008 2009 2010 2011 2012 2013 2014

Return 16.40% 27.45% 33.22% -2.07% 21.22% 42.09% 55.34%

Answer:
We need to find the geometric avergae return
Year Return 1+Return
2008 16.40% 1.16
2009 27.45% 1.27
2010 33.22% 1.33
2011 -2.07% 0.98
2012 21.22% 1.21
2013 42.09% 1.42
2014 55.34% 1.55
2015 -7.77% 0.92
2016 -10.25% 0.90
2017 11.88% 1.12

Product of '(1+return)' 4.80

Geometric Average Return 16.97%

Q13. Using the returns in preceding problem, determine the arithmetic average return and standard
deviation of returns.

Answer:

Arithmetic Average Return 18.75%

Standard Deviation 21.62%

 2015 2016 2017
-7.77% -10.25% 11.88%

return and standard