The historical returns for the past three years for Stock B and the stock market portfolio are Stock B: 24 percent, 0 percent, 24 percent; market portfolio: 10 percent, 12 percent, 20 percent. Calculate the average return for Stock B and the market portfolio.

Question

Quizplus · Accepted Answer

To calculate the average return, we add up the returns for each year and divide by the total number of years (in this case, three years). 
Average return for Stock B: (24% + 0% + 24%) / 3 = 16%
Average return for market portfolio: (10% + 12% + 20%) / 3 = 14%

Therefore, the best choice is A because it correctly calculates the average returns for both Stock B and the market portfolio.

The Historical Returns for the Past Three Years for Stock