Respuesta :
The average yearly return over the two years is 25% when it falls to $80 in the first year and raises to $100 in the second year.
How do you calculate the average yearly return over the two years?
It increases to $100 the second year you own it, returning you to your starting point (no dividends were paid). the first year, you suffered a 50% loss (you lost half of your money). You made 100% the following year (you doubled your money). Thus, (50% + 100%)/2 = 25% was the average return over the two years.
What Does an Average Annual Return Mean?
The money made from an investment over the course of the investment term is known as the average annual return (ARR). A fair average annual return ought to be greater than the interest rate received from a bank deposit.
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