Quantitative Methods Q107

107Judith Owen buys a share for $45 on January 1, 2011. The price of the share is $54 on January 1, 2012 and $63 on January 1, 2013. Assuming no dividends were paid, which of the following best represent the geometric mean annual return earned by Owen over the two year period?

Option : A
Explanation : First, calculate the holding period returns at the end of year 1 and year 2. Geometric Mean = [(1 + 0.2)(1 + 0.1667)]0.5 − 1 = 18.32%

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