You own a stock that has produced an arithmetic average return of 7.8 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 = .078 × 5 = .39Year 5 return = .39 - (.16 + .11 - .19 + .03) = 28 percent

You Own a Stock That Has Produced an Arithmetic Average