You invested $1,000 in Netflix stock 2 years ago. 1st year's return was +25%, but in the 2nd year the return was -25% (a
Posted: Thu May 05, 2022 7:54 am
You invested $1,000 in Netflix stock 2 years
ago. 1st year's return was +25%, but
in the 2nd year the return
was -25% (alas!).
1) What is your 2-year holding period return for this
investment?
2) What is the appropriate average return for your 2-year
investment above?
3) What is the dollar value of your investment at the end
of 2nd year?
4) Your friend says, "The average of 25% and -25% is just
zero. So, you didn't lose any money for this investment!" Is this
comment true or false?
5) From the analysis thus far, which average measure is
appropriate as an annual return in this case?
Arithmetic average return
Geometric average return
Year Year 1 Year 2 Return +25% -25%
ago. 1st year's return was +25%, but
in the 2nd year the return
was -25% (alas!).
- You Invested 1 000 In Netflix Stock 2 Years Ago 1st Year S Return Was 25 But In The 2nd Year The Return Was 25 A 1 (9.8 KiB) Viewed 40 times
investment?
2) What is the appropriate average return for your 2-year
investment above?
3) What is the dollar value of your investment at the end
of 2nd year?
4) Your friend says, "The average of 25% and -25% is just
zero. So, you didn't lose any money for this investment!" Is this
comment true or false?
5) From the analysis thus far, which average measure is
appropriate as an annual return in this case?
Arithmetic average return
Geometric average return
Year Year 1 Year 2 Return +25% -25%