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The S&P 500 index delivered a return of 20%, -10%, 20%, and 5% over four successive years.
What is the arithmetic average annual return for four years?
A) 10.50%
B) 13.13%
C) 8.75%
D) 9.63%

Respuesta :

pedrocarratore

Answer:

C) 8.75%

Explanation:

Number of periods = 4 years

Given return rates = 20%, -10%, 20%, and 5%

To obtain the arithmetic average annual return, add the return rates given for all periods and divide the sum by the number of periods.

[tex]AAR = \frac{20-10+ 20+ 5}{4} \\AAR=8.75\%[/tex]

Over four years, the S&P 500 index delivered an arithmetic average annual return of 8.75%.

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