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%

arithmetic average annual return is 0

correct option is B) 0%

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

    .........................1

here 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

= 0

so arithmetic average annual return is 0

correct option is B) 0%

answer; dividing net income by 1- t ;