Kids Toy Co. has had total returns over the past five years of 0%,7%,-2%,10%,and 12%. What was the arithmetic average return on this stock?
A) 5.40%
B) 5.50%
C) 6.15%
D) 6.33%
E) 6.75%

Question

Quizplus · Accepted Answer

The arithmetic average return is the sum of the returns divided by the number of returns. In this case, the sum of the returns is 0% + 7% + (-2%) + 10% + 12% = 27%. The number of returns is 5. Therefore, the arithmetic average return is 27% / 5 = 5.40%.