Given the following share price history, what is the arithmetic average return per share?
Year |
Share price |
1 |
$20 |
2 |
$22 |
3 |
$24 |
4 |
$26 |
5 |
$28 |
Select one:
a. 3.24%
b. 4.05%
c. 5.36%
d. 8.78%
e. 10.75%
From the given information, we can calculate the returns using excel as:
Excel formulas used:
The formula to calculate arithmetic average is:
=(Sum of all observations)/(Number of observations)
The returns as calculated from the share prices are 10.00%, 9.09%,
8.33% and 7.69%.
So, the number of observations =4
Arithmetic average return=(10.00% + 9.09% + 8.33% + 7.69%)/4
=(10.00% + 9.09% + 8.33% + 7.69%)/4
=35.11%/4
=8.78%
Answer: 8.78%
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