Consider an Investment Held Over Three Years with a Return

question 16

Multiple Choice

Consider an investment held over three years with a return of +20 percent in the first year, ?25 percent in the second year, and +20 percent in the third year. What is the arithmetic mean return on the investment?

• A) -2.6%
• B) +2.6%
• C) +5.0%
• D) +8.0%
• E) Cannot be calculated from the information provided

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Definitions:

Microeconomics

The branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of limited resources.

Individual Households

Single units comprising one or more persons within an economy that make decisions about consumption, saving, and labor supply.

Inflation

The speed at which the overall price level for products and services increases, diminishing the buying power.

Unemployment

The situation where individuals who are capable of working and willing to work do not find employment.