You own a stock that has produced an arithmetic average return of 5.6 percent over the past five years.The annual returns for the first four years were 15,10,-18,and 8 percent,respectively.What was the rate of return on the stock in year five?
A) -5.00 percent
B) 2.75 percent
C) 6.25 percent
D) 13.00 percent
E) 32.00 percent

Question

Quizplus · Accepted Answer

Total return = 0.056 × 5 = 0.28
Year 5 return = 0.28 - (0.15 + 0.10 - 0.18 + 0.08) = 13 percent

You Own a Stock That Has Produced an Arithmetic Average