A portfolio manager generates a 5% return in Year 1, a 12% return in Year 2, a negative 6% return in Year 3, and a return of 2% in Year 4. The annualized return for the entire period is the closest to ________.
A) 3.05%
B) 3.25%
C) 3.50%
D) 3.77%

Question

Quizplus · Accepted Answer

The annualized return is calculated using the geometric mean formula:(1 + 5%) * (1 + 12%) * (1 + (-6%)) * (1 + 2%) = 1.0325Annualized return = (1.0325)^(1/4) - 1 = 3.77%

A Portfolio Manager Generates a 5% Return in Year 1