The arithmetic average return is the:
A)summation of the returns for a number of years, t, divided by (t − 1).
B)compound total return for a period of years, t, divided by t.
C)average compound return earned per year over a multi-year period.
D)average squared return earned in a single year.
E)return earned in an average year over a multi-year period.

Question

Quizplus · Accepted Answer

The arithmetic average return is calculated by summing up the returns for each year over a multi-year period and then dividing by the number of years. This gives the return earned in an "average" year over the period, making option E correct.

The Arithmetic Average Return Is The