Question

Vignette Stonemoss invested in an index tracking ETF 4 years ago. The rate of return on the investment was 17.6% during the first year, 12.3% during the second year, 2.9% during the third year and 9.1% in the fourth year. Calculate the average rate of return that Vignette made on this investment.

Answer 1

Vignette Stonemoss's average annual rate of return on her index tracking ETF investment over four years is approximately 10.725%, calculated by summing the individual yearly returns and dividing by the number of years.

Step-by-step explanation:

To calculate the average rate of return for Vignette Stonemoss's investment in an index tracking ETF over four years, you simply add up each year's return and divide by the number of years. Her investment had returns of 17.6%, 12.3%, 2.9%, and 9.1% over the four years. The formula for average rate of return is:

Average Rate of Return = (Year 1 Return + Year 2 Return + Year 3 Return + Year 4 Return) / Number of Years

Plugging in Vignette's numbers:

Average Rate of Return = (17.6% + 12.3% + 2.9% + 9.1%) / 4

Average Rate of Return = 42.9% / 4

Average Rate of Return = 10.725%

The average annual rate of return for the investment is approximately 10.725%.