General Electric (GE) is one of the world’s largest companies; it develops, manufactures, and markets a wide range of products, including medical diagnostic imaging devices, jet engines, lighting products, and chemicals. In 2015, the stock price rose 23.27%, and in 2016, the stock price rose 1.44%.
Source: Data extracted from finance.yahoo.com, January 9, 2017.
a. Compute the geometric mean rate of return per year for the two-year period 2015–2016. (Hint: Denote an increase of 23.27% as R2 = 0.2327.)
b. If you purchased $1,000 of GE stock at the start of 2015 what was its value at the end of 2016?
c. Compare the result of (b) to that of Problem 3.20 (b).
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