NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investments
A portfolio has returns of 10%, 20% and 30% in three successive years. What is its arithmetic mean annual return?
The arithmetic mean annual return is 20%. Adding the three yearly returns of 10%, 20% and 30% gives 60%, and dividing by the three years gives 20% per year. The sum of 60% is not an average.
- A15%
- B25%
- C20%Correct
- D60%
Explanation
Arithmetic mean = (10 + 20 + 30)/3 = 60/3 = 20%. The figure 60% is the simple sum and not an average. 15% or 25% do not arise from the data.
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