Question

A stock has the following returns over three consecutive years: 85%, 58%, and 128%. What is the arithmetic average?

Answer 1

The stock's arithmetic average is:

90.33%.

Step-by-step explanation:

a) Data and Calculations:

Returns over three consecutive years:

Year 1 = 85%

Year 2 = 58%

Year 3 = 128%

Total returns = 271%

Average = Total returns divided by number of years

= 271/3

= 90.333

=90.33%

b) The arithmetic average is the total returns divided by the number of years involved. This implies that we find the average or the mean by adding up some pieces of data together and dividing by the number of the pieces of data.