You Own a Stock That Has Produced an Arithmetic Average

question 95

Multiple Choice

You own a stock that has produced an arithmetic average return of 5.6 percent over the past five years. The annual returns for the first four years were 15, 10, −18, and 8 percent, respectively. What was the rate of return on the stock in year five?

• A)−5.00%
• B)2.75%
• C)6.25%
• D)13.00%
• E)32.00%

---

Definitions:

Cash Dividend

A cash distribution of earnings by a corporation to its shareholders.

Financing Activities

These activities relate to changes in the size and composition of the equity and borrowings of an entity, reported in the statement of cash flows.

Retirement

The act of leaving one's job and ceasing to work, often due to age, after a career of service, with financial support through savings, investments, or pensions.

Long-Term Note

A debt security with a maturity of more than one year, used by businesses and governments to borrow money.