Question

The following data is provided for a market 500 Index: Year Total return Year Total return 2000 16.0% 2010 2.0% 2001 8.0% 2011 3.0% 2002 -3.0% 2012 3.0% 2003 1.0% 2013 4.0% 2004 5.0% 2014 5.0% 2005 21.0% 2015 4.0% 2006 43.0% 2016 3.0% 2007 4.9% 2017 3.5% 2008 -7.0% 2018 4.5% 2009 0.1% 2019 5.8% Calculate the last 10 -year arithmetic average annual rate of return on the market Index.

3.78%

2.69%

0.37%

3.93%

Answer 1

Year	Total return	Year	Total return
2000	16%	2010	2%
2001	8%	2011	3%
2002	-3%	2012	3%
2003	1%	2013	4%
2004	5%	2014	5%
2005	21%	2015	4%
2006	43%	2016	3%
2007	4.9%	2017	3.5%
2008	-7%	2018	4.5%
2009	0.1%	2019	5.8%

Arithmetic average return = Sum of total returns /No. of years

Arithmetic average return for last 10 years i.e. from 2010 to 2019

= (2 % + 3 % + 3 % + 4 % + 5 % + 4 % + 3 % + 3.5% + 4.5 % + 5.8 % )/10

= 37.8 %/10 = 3.78 %

Hence option “3.78 %” is correct answer.