Asked by Pristine7
For a 5-year period, a stock had annual returns of 6.4 percent, -11.2 percent, 0.3 percent, 19.8 percent, and 13.4 percent. What is the arithmetic average return?
Group of answer choices
5.74 percent
6.28 percent
7.18 percent
5.18 percent
7.09 percent
Solved by verified expert
Answered by BarristerPuppy1091
Answer is 5.74 percent
Given : annual returns of 6.4 percent, -11.2 percent, 0.3 percent, 19.8 percent and 13.4 percent for a 5 year period.
Ask : Arithmetic average return.
Arithmetic average return is the average of all returns in the sub period and it can be calculated by adding all returns in the sub periods and dividing it by total number of periods.
Formula is as follows:
Arithmetic average return = (R1+R2 + ...+Rn) / n
Where R1, R2 and Rn is the returns relating to sub periods and n is the total number periods.
Hence, answer is as follows :
Arithmetic average return on above problem =( 6.4+(-11.2)+0.3+19.8+13.4) / 5
Arithmetic average return = 28.7/5
Arithmetic average return = 5.74 percent
