Matt James is assessing the performance of his portflio over the last four years.In computing the average return,he decides to use the geometric average retum since it provides a more conservative retum than the arithmetic mean.The annual retums on his portfolio over each ofthe last four years were 50%,30%,-25%,and-15%.The geometic average return is then closest to:
A.5.44%.
B.5.59%.
C.8.56%.
D.10.00%.
Answer:B
gp=[(1.50)*(1.30)*(0.75)*(0.85)]^1/4-1=5.59%
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