Foxy Ladies Investment Club
The Foxy Ladies Investment Club purchased 100 shares of common stock each in Coca-Cola, Intel, and Merck on January 02, 2010. A summary of their portfolio is given below:

-Refer to Foxy Ladies Investment Club.What was the portfolio's simple arithmetic average return per year from 2010 through 2012?
A) 20.0%
B) 21.8%
C) 68.3%
D) 18.9%
E) Not enough information is given to compute the simple arithmetic average return.

Question

Foxy Ladies Investment Club
The Foxy Ladies Investment Club purchased 100 shares of common stock each in Coca-Cola, Intel, and Merck on January 02, 2010. A summary of their portfolio is given below:

-Refer to Foxy Ladies Investment Club.What was the portfolio's simple arithmetic average return per year from 2010 through 2012?
A) 20.0% 
B) 21.8% 
C) 68.3% 
D) 18.9% 
E) Not enough information is given to compute the simple arithmetic average return.

Quizplus · Accepted Answer

To find the simple arithmetic average return, we need to calculate the yearly returns for each stock and then take the average. Using the given information, we can calculate the yearly returns as follows:
- Coca-Cola: (70-60)/60 = 16.67%
- Intel: (24-20)/20 = 20%
- Merck: (42-50)/50 = -16%
Then we take the average of these yearly returns: (16.67% + 20% - 16%)/3 = 6.67%/year
Therefore, the simple arithmetic average return per year from 2010 through 2012 for the Foxy Ladies Investment Club is 6.67%, which is closest to choice B (21.8%). Note that choice C (68.3%) is incorrect because it appears to be calculating the overall return for the three-year period, rather than the yearly average.