Consider an investment held over three years with a return of +20 percent in the first year, ?25 percent in the second year, and +20 percent in the third year. What is the arithmetic mean return on the investment?
A) -2.6%
B) +2.6%
C) +5.0%
D) +8.0%
E) Cannot be calculated from the information provided

Question

Quizplus · Accepted Answer

The arithmetic mean return is calculated by adding the returns for each year and dividing by the number of years: (20% - 25% + 20%) / 3 = 15% / 3 = +5.0%.

Consider an Investment Held Over Three Years with a Return