NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investments
A portfolio has returned 10%, 20% and -10% in three consecutive years. What is its arithmetic mean annual return?
The arithmetic mean annual return is 6.67%. Add the three yearly returns, 10, 20 and minus 10, to get 20 percentage points, then divide by the three years to get roughly 6.67 percent per year.
- A6.67%Correct
- B10%
- C20%
- D0%
Explanation
Arithmetic mean = (10 + 20 - 10)/3 = 20/3 = 6.67%. The 10% option would result from dividing by 2, ignoring the third year. Summing without dividing gives 20%.
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