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We discussed the following in the context of having to use a process for ln(S) rather than S itself because the latter implies compounding arithmetic
We discussed the following in the context of having to use a process for ln(S) rather than S itself because the latter implies compounding arithmetic average rates of return which is not legitimate. Over the recent 5-yr period your financial advisor has achieved the following returns for your portfolio: year 1=+30%, year 2=25%; year 3=+20%; year 4=15%; year 5=+30%. What are the arithmetic and geometric average annual returns on this stock over the 5 -yr time frame, respectively? 5.27%;8.0% 8.0%;5.27% 8.0%;6.63% 5.86%;8.0% 8.0%;5.86%
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