EXAM #2 – Formulas (CHAPTERS 4, 5, 8, 9, & 11)

Question 1

Geometric Mean Return

Answer 1

n√(1+ r1)(1+ r2)…(1+ rn) – 1 x 100

rn= % return for period n
n = number of periods

Question 2

Arithmetic Return

Answer 2

Effective Annual Rate (EAR) = [1 + (i/n)]^n – 1