first to find <b>annual rate of return</b>, for which formula is.. (ending valuePtbeginning valuePt1 + cash flowCt) / begining valuePt1
<b>for asset a</b>
year cashflow(Ct) beginingvalue(Pt1) endingvalue(Pt)
2000 1000 20000 22000 so 2200020000+1000/20000 *100 which will be 15% with a gain of 2000
year 2001
2100022000+1500/22000 *100 which will be 2.27% with loss of 1000
year 2002
2400021000+1400/21000 *100 which will be 20.95% with 3000 gain
average annual return for asset a is 12.74 the average of (2.27+20.95+15/3)
<b>for asset b</b>
year 2000
2000020000+1500/20000 *100 which is 7.50% with 0 gain/loss
year 2001
2000020000+1600/20000 *100 which is 8.00% with 0 gain/loss
year 2002
2100020000+1700/20000 *100 which is 13.50 with 1000 gain
average annual return for asset b is 9.67 average of (13.50+8.00+7.50%/3)
this is how anual rate of return and average annual rate of return will be calculated,
i dont understand this line of yours "<b>Using those returns to calculate the risk of those returns for each asset over the 3yrs</b>." clear it so i can further help you with this if you want to. jazakALLAH
