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Math Help - arithmetic and geometric return....

  1. #1
    Newbie
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    Oct 2009
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    arithmetic and geometric return....

    a stock has had the following year-end prices and dividends:

    year price Dividend
    1 $43.42 --
    2 $46.21 $0.52
    3 $52.72 $0.61
    4 $47.56 $0.61
    5 $58.83 $0.74
    6 $70.55 $0.82

    How would I incorporate the dividends to find the arithmetic and geometric return of the stock?

    PLEASE HELP!!
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  2. #2
    Junior Member
    Joined
    Sep 2008
    From
    Indiana
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    I would assume for arithmetic you would simply add up the dividends and divide by the number of years in which dividends were paid.

    \frac {.52 + .61 + .61 + .74 + .82}{5}

    As for the geometric return of the stock you take the percentage gain for each year, multiply them, and take that amount to the power of \frac {1}{(the number of items in the series)}, all minus 1.

    Really great explanation here, What is the difference between arithmetic and geometric averages?
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