Sharif's portfolio generated returns of 10 percent, 9 percent, −2 percent, and 6 percent over four years. What was his average return over this period?

To calculate Sharif's average return over the four-year period, you need to find the arithmetic mean of the four annual returns.

The formula for the average return is:

\[
\text{Average Return} = \frac{\text{Sum of Returns}}{\text{Number of Years}}
\]

Given the returns:

\[
10\% \, , \, 9\% \, , \, -2\% \, , \, 6\%
\]

Let's calculate the sum of these returns:

\[
10\% + 9\% + (-2\%) + 6\% = 10 + 9 - 2 + 6 = 23\%
\]

Now, divide the sum by the number of years (4 years):

\[
\text{Average Return} = \frac{23\%}{4} = 5.75\%
\]

So, Sharif's average return over the four-year period was **5.75%**.

Would you like more details on this calculation, or do you have any other questions?

Here are 5 related questions you might find useful:
1. How does the arithmetic mean differ from the geometric mean in calculating average returns?
2. What would Sharif's average return be if one of the returns were negative?
3. How would the average return change if we added a fifth year with a 15% return?
4. What is the importance of considering average returns over multiple years?
5. How does variance in returns affect the risk profile of a portfolio?

**Tip:** When calculating average returns for investments, it's important to distinguish between arithmetic and geometric means, especially for volatile returns. The geometric mean is generally more accurate for understanding compounded growth rates over time.

Learn how to calculate Sharif's average return over four years using his portfolio returns: 10%, 9%, -2%, and 6%. Understand the arithmetic mean formula and its application in determining average returns. Suitable for students and professionals interested in financial calculations.

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