When most people refer to mean rate of return,they are referring to the:
A)holding period rate of return.
B)arithmetic average rate of return.
C)geometric average rate of return.
D)cumulative average rate of return.

Question

Quizplus · Accepted Answer

The arithmetic average rate of return is the most common method used to calculate the mean rate of return. It is calculated by adding up all the annual returns and dividing by the number of years. This gives a simple average return for the investment. Some investors may use the geometric average rate of return, but this is less common as it requires more complex calculations and is less intuitive. The holding period rate of return would only be relevant for a specific holding period, and the cumulative average rate of return is not a commonly used term in finance.

When Most People Refer to Mean Rate of Return,they Are