21. Geometric Indexes (LO4) Another type of index is the geometric index. The calculation of a geometric index is similar to the calculation of a geometric return:

1 +  R G  =  [(1 +  R 1 )(1 +  R 2 ) . . . (1 +  R N )] 1/N The difference in the geometric index construction is that the returns used are the returns for the different stocks in the index for a particular period, such as a day or year. Construct the geometric index returns for Problem 14 over each of the two years. Assume the beginning index level is 100.