Question

The S&P 500 index delivered a return of 10%, 15%, 15%, and -30% over four successive years.
What is the arithmetic average annual return for four years?
A) 3.00%
B) 3.50%
C) 2.25%
D) 2.50%

Answer 1

Answer:

D) 2.50%

Explanation:

The arithmetic average return is simply the mean of all given return rates. There are four return rates and their values are, 10%, 15%, 15%, and -30%

$AAR = \frac{10+15 +15-10}{4}\\AAR= 2.5\%$

S&P 500 index delivered an arithmetic average annual return of 2.5% for four years