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letamp;#39;s take a look at arithmetic versus logarithmic rates of return now the reason we use rates of return rather than the change in the price of a stock for example is because a $1 change in a $10 stock is more docHub than a $1 change in a $100 stock and actually you see it reported a lot in the uh Wall Street Journal and other newspapers about how fast the Dow Jones Industrial average got to the next 1,000 mark and it should get to each one faster and faster because itamp;#39;s a smaller percentage gain when you go from 1,000 to 2,000 thatamp;#39;s 100% return a doubling but when you go from 10,000 to 11,000 thatamp;#39;s just 10% so you know thatamp;#39;s why we look at rates of return and the standard rate of return or arithmetic rate of return and we will signify with the uh R subscript a for arithmetic is the future value divided by the present value minus one or you can also write future value minus present value all divided by present value so itamp;#39;s essent
