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Calculating Geometric Mean Return with the BA II Plus

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    • Avatar of DR515DR515
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        • Undecided
        21 Mar 2018 at 7:41 pm
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        So I’m having some trouble getting the correct answer to the following problem in the level 1 reading: The returns for the 5 periods are as follows…. 15%, -5%, 10%, 15%, 3%. In using the BAII Plus I am multiplying all of the returns (1.15)*(0.95)*(1.10)*(1.15)*(1.03) = 1.4235 I then press the y/x button and hit 5 but I get 5.8445 and I subtract one to get 4.85 and I should according to the example in the reading be getting 0.0732 or 7.32%.

        Basically I could use some help clarifying how to use the BAII plus to calculate the geometric mean return!

        Thanks

      • Avatar of LeChiffreLeChiffre
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          • CFA Level 2
          21 Mar 2018 at 8:15 pm
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          1.4235 [y^x] (1/5) = 1.0732 – 1 = 7.32%

          The key here is to raise the number you get after multiplying period returns to (1/n, n = number of periods, in this case 5, resulting in 0.20). This should help.

        • Avatar of DR515DR515
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            • Undecided
            21 Mar 2018 at 8:21 pm
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            Excellent Thank you:) 

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