Which of the Following Statements Is FALSE

question 85

Multiple Choice

Which of the following statements is FALSE?

• A) The geometric average return is a better description of the long-run historical performance of an investment.
• B) We should use the arithmetic average return when we are trying to estimate an investment's expected return over a future horizon based on its past performance.
• C) The geometric average return will always be above the arithmetic average return, and the difference grows with the volatility of the annual returns.
• D) The compounded geometric average return is most often used for comparative purposes.

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Definitions:

Cournot Reaction Function

A mathematical representation in economics that shows how one firm reacts to the quantity choice of another firm in a duopoly market setting.

Inverse Demand Function

Represents the relationship between the price of a good and the quantity demanded, showing how price must adjust to maintain equilibrium between supply and demand.

Marginal Costs

The expenditure involved in manufacturing one more unit of a product or service.

Major League Baseball

A professional baseball organization that is the oldest of the four major professional sports leagues in the United States and Canada.