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QUESTION
Caswell Enterprises had the following end-of-year stock prices over the last five years and paid no dividends. TimeCaswell: Time Caswell 1 $12
Caswell Enterprises had the following end-of-year stock prices over the last five years and paid no dividends.
TimeCaswell: Time Caswell
1 $12
2 $9
3 $7
4 $6
5 $12
- Calculate the annual rate of return for each year from the above information.
- What is the arithmetic average rate of return earned by investing in Caswell's stock over this period?
- What is the geometric average rate of return earned by investing in Caswell's stock over this period?
- Considering the beginning and ending stock prices for the five-year period are the same, which type of average rate of return best describes the annual rate of return earned over the period (arithmetic or geometric)?
