# 7 Calculating the geometric and arithmetic average rate of return ) the common stock f the brangus Cattle company had the following end of year stock prices over the last 5 years no cash dividends.

Time Brangus cattle company

1 $17

2 8

3 12

4 22

5 28

A) Calculate the annual rate of return for each year from the above information

B) What s the arithmetic average rate of return earned by investing in Brangus cattle company stock over this period.

C) What is the geometric average rate of return earned by investing in Brangus cattle stock period

D) Which type of average rate of return best describe the average annual of return earned over the period ( arithmetic or geometric? Why

a) The annual rate of return at the end of the year 2 is ..% ( round to two decinal)

The annual rate of return at the end of the year 3 is ..% ( round two decimal)

The annual rate of return at the end of the year 4 is ..% ( round two decimal)

The annual rate of return at the end of the year 5 is ..% ( round two decimal)

b) The aritmetric average rate of return earned by investing in Brangus cattle stock over this period % ( round to two decinal)

c) The geometric average rate of return earned by investing in Brangus cattle stock over this period % ( round to two decinal)

d) Which type of average rate of return best describe the average annual rate of return earned over the period ( the arithmetic or geometric) why

a) Aritmetic average return best describes the average annual rate of return over period because it takes compound into account so it answers the question concerning the expected rate of return over a multi year period

b) Geometric average return best describe the average annual rate of return over a period because it is a simple average so it answer the question concerning the expected rate of return over multi year period.

c) Geometric average return best describe the average annual rate of return over a period because it takes compound so it answer the question concerning the expected rate of return over multi year period.

d) Aritmetic average return best describes the average annual rate of return over period because it is a simple average so it answers the question concerning the expected rate of return over a multi year per