You own a stock that has produced an arithmetic average return of 8.6 percent over the past five years.The annual returns for the first four years were 16,11,-19,and 3 percent,respectively.What was the rate of return on the stock in year five?
A) -5.00 percent
B) 2.75 percent
C) 6.25 percent
D) 28.00 percent
E) 32.00 percent

Question

Quizplus · Accepted Answer

Total return = 0.086 × 5 = 0.43
Year 5 return = 0.43 - (0.16 + 0.11 - 0.19 + 0.03) = 32 percent

You Own a Stock That Has Produced an Arithmetic Average