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Calculating the geometric and arithmetic average rates of return ) ( Related to Checkpoint 7 . 2 on page 2 0 8 ) Marsh Inc.

Calculating the geometric and arithmetic average rates of return)(Related to Checkpoint 7.2 on page 208) Marsh Inc. had the following end-of-year stock prices over the last five years and paid no cash dividends: Time Marsh $101218410 a. Calculate the annual rates of return for each year from this information. b. What is the arithmetic average rate of return earned by investing in Marsh's stock over this period? c. What is the geometric average rate of return earned by investing in Marsh's stock over this period? which type of average rate of return (the arithmetic or geometric) better describes the average annual rate of return earned over the period?

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