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**CFA Practice Question**

Over 6 months, a stock has monthly returns of 2.3%, -5.9%, 3.2%, 7.5%, -1.1%, and -1.6%. What is the geometric mean return over the 6 months?

A. 0.73%

B. 0.64%

C. 4.40%

**Explanation:**Mean Geometric Return = ((1+r1)*(1+r2)*(1+r3)*(1+r43)*(1+r5)*(1+r6))

^{(1/6)}- 1, where r1, r2 etc. are returns.

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**User Contributed Comments**
4

User |
Comment |
---|---|

tijean25 |
Where are the returns on this? I need someone to show how to get to that result |

enetis |
kinda confused here. thought geometric mean does'nt work for negative returns |

praj24 |
@enetis - if you look at the formula, you're adding 1 to the return. e.g -5.9%, therefore it'll be 1-0.059 = 0.941 ((1.023)(0.941)(1.032)(1.075)(0.989)(0.984))^1/6 - 1 *100 = 0.64% |

Rohule |
im confused since its montly returns and ther formula noes not need exponetial, i thought that was only for anual returns |