Over the past four years, a portfolio experienced returns of 4%,4%,17%, and -12%. The geometric mean return of the portfolio over the four-year period is closest to:
Add one to each of the given returns, then multiply them together and take the fourth root of the resulting product.0.92×1.04×1.17×0.88=0.985121; 0.985121 raised to the 0.25 power is 0.996259. Subtracting one and multiplying by 100 gives the correct geometric mean return:
[(0.92×1.04×1.17×0.88)0.25-1]×100 =-0.37%.