Suppose the quarterly arithmetic average return for a security is 5% per quarter and the security gives a return of 10% each over the next two quarters. The arithmetic average return over the six quarters is
A)7.5%.
B)9%.
C)6.67%.
D)10%.

Question

Quizplus · Accepted Answer

To calculate the arithmetic average return over six quarters, we need to find the average of all the quarterly returns.

Given: 
Quarter 1 return = 5% 
Quarter 2 return = 5%
Quarter 3 return = 10%
Quarter 4 return = 10%
Quarter 5 return = 5%
Quarter 6 return = 5%

Average = (5% + 5% + 10% + 10% + 5% + 5%) / 6 = 40% / 6 = 6.67%

Therefore, the arithmetic average return over the six quarters is 6.67%. So, the correct answer is option C.

Suppose the Quarterly Arithmetic Average Return for a Security Is