Celsius stock had year-end prices of $42, $37, $44, and $46 over the past four years, respectively. What is the arithmetic average rate of return?

Question

Quizplus · Accepted Answer

The arithmetic average rate of return is calculated by finding the sum of the yearly returns and then dividing by the number of years. The yearly returns are calculated based on the change in price from one year to the next. Year 1 to Year 2: $(37 - 42) / 42 = -11.90\%$Year 2 to Year 3: $(44 - 37) / 37 = 18.92\%$Year 3 to Year 4: $(46 - 44) / 44 = 4.55\%$Sum of yearly returns: $-11.90 + 18.92 + 4.55 = 11.57\%$Average rate of return over the 3 periods: $11.57\% / 3 = 3.85\%$.

Celsius Stock Had Year-End Prices of $42, $37, $44, and $46