Question

Amazon stock prices gave a realized return of 6​%, negative 6​%, 9​%, and negative 9​% over four successive quarters. What is the annual realized return for Amazon for the​ year?

Answer 1

-1.167%

Step-by-step explanation:

The current value of the stock is given by applying all of the realized returns to the initial purchase price. Let 'A' be the initial price, the price at the end of the year is:

`P = A*(1+0.06)*(1+0.09)*(1-0.06)*(1-0.09)\\P=0.9883A`

At the end of the year, the stock had a price of 0.9883 times the initial price, the annual realizes return was:

`r=(0.9883 - 1)*100\%\\r= -1.167\%`

Annual realized return was -1.167%.