Describes the average annual rate of return earned over the


Marsh Inc. had the following? end-of-year stock prices over the last five years and paid no cash? dividends:

Time

Marsh

Year 1 ?$10

Year 2 $12

Year 3 $18

Year 4 $7

Year 5 $10

a. Calculate the annual rate of return for each year from the above 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?

d. Considering the beginning and ending stock prices for the? five-year period are the? same, 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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Financial Management: Describes the average annual rate of return earned over the
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