The following data is provided for a market 500 Index: &nb

The following data is provided for a market 500 Index:

                        Year     Total return     Year     Total return
                        2010    9.0%                2020    2.0%
                        2011    11.0%             2021    3.0%
                        2012    -3.0%               2022    3.0%
                        2013    1.0%                2023    -1.0%
                        2014    5.0%                2024    5.0%
                        2015    -12.0%             2025    4.0%
                        2016    3.0%                2026    -3.0%
                        2017    4.9%                2027    3.5%
                        2018    -7.0%               2028    7.0%
                        2019    0.1%                2029    5.8%

Calculate the 20-year arithmetic average annual rate of return on the market Index.

A) 2.07%

B) 0.10%

C) 2.59%

D) 5.62%

Expert Solution

WE HAVE TO ADD ALL 20 YEARS RETURN AND THEN DIVIDE BY 20 TO GET AVERAGE ANNUAL RATE OF RETURN

AS SHOWN IN IMAGE, TOTAL RETURN OF ALL 20 YEARS = 41.3%

SO AVERAGE RETURN = 41.3%/20 = 2.07%

ANSWER : A) 2.07%

jeff jeffy answered 4 months ago

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