Question

What is the arithmetic average return for a stock that had annual returns of 8 percent, 2 percent, and 11 percent for the past 3 years?

Answer 1

The arithmetic average return for a stock that had annual returns of 8 percent, 2 percent, and 11 percent for the past 3 years is (C) 7%.

What is the arithmetic average return?

• The Arithmetic Average Return is computed by adding the rates of return from the "n" sub-periods and dividing the result by "n."
• In other words, the average return is calculated by adding the returns of "n" sub-periods and then dividing by "n."
• The arithmetic average return is the return on investment computed by adding all sub-period returns and then dividing by the total number of periods.

To find the arithmetic average return for a stock that had annual returns of 8 percent, 2 percent, and 11 percent for the past 3 years:

Add all the return percentages and divide them by 3 as follows:

$\frac{8+2+11}{3} =7$

Therefore, the arithmetic average return for a stock that had annual returns of 8 percent, 2 percent, and 11 percent for the past 3 years is (C) 7%.

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The question you are looking for is given here:

What is the arithmetic average return for a stock that had annual returns of 8 percent, 2 percent, and 11 percent for the past 3 years?

(A) 8%

(B) 6%

(C) 7%

(D) 5%