Question

The S&P 500 index delivered a return of 25%, 15%, -35%, and -5% over four successive years.

What is the arithmetic average annual return for four years?
A) -5%
B) 0%
C) 5%
D) 3%

Answer 1

arithmetic average annual return is 0

correct option is B) 0%

Step-by-step explanation:

given data

return r1 = 25%

return r2 = 15%

return r3 = -35%

return r4 = -5%

to find out

What is the arithmetic average annual return for four years

solution

we know that arithmetic average annual return is express as

`\bar{X} = (\sum x)/(N)` .........................1

here
`\bar{X}` is arithmetic mean and ∑x is sum of return and N is number of observation i.e 4

so put here value in equation 1 we get

`\bar{X} = (25+15-35-5)/(4)`

`\bar{X}` = 0

so arithmetic average annual return is 0

correct option is B) 0%