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:

Output

The total amount of goods or services produced by a company, industry, or economy within a specific period.

Total Cost

The aggregate cost of producing a given level of output, including both fixed and variable costs.

Output Level

The total quantity of goods or services produced by a firm or industry within a specific period.

Average Fixed Cost

The fixed costs of production divided by the quantity of output produced, which decreases as more units are produced.