if a stock goes up 20%@ in year 1 and 10@ in year 2, how do you calculate the average annual increase?

Answer 1

20% in the first year is, naturally, a 20% increase.
if the stock then goes up 10%
you need to ensure where you are counting from because a ten percent increase from the end of year one is actually a 12% increase on the beginning price.
100 plus 20% = 120
120 plus 10% = 132
so after two years you have gained 32% on your capital, average 16%
if your increase on your capital in year two was 10%
100 plus 20% = 120
100 plus 10% = 110
total = 130 for an average 15%

Answer 2

Say the stock started at $100. After one year it would go up 20% to $120. The second year it goes up 10% to $132. Over two years it went up $32 or 32%. Divide 32 % by two to come up with an average of 16% per year.

Answer 3

$100, after year1 becomes 120 and after year 2 becomes132. So, $1 becomes 1.32

The average increase over the 2 years is therefore:
1.32^1/2 -1= 0.1489%
You can check that this is correct because 100x1.1489x1.1489=132.00

Note that if you take the arithmetic mean of 15%, the answer becomes 132.25. The error is small because the term is only 2 years. It becomes progressively bigger as the term becomes longer

Answer 4

You nailed it!!! The bond or stock or fund has paid an average of 10.5% every year for the past 10 years The bond or stock or fund has returned a TOTAL of 5% for the past 3 years (about 1.6% a year).

Answer 5

add each percentage and divide by how many percentages you used