You Have Owned a Stock for Seven Years

question 48

Multiple Choice

You have owned a stock for seven years. The geometric average return on this investment for those seven years is positive even though the annual rates of return have varied significantly. Given this, you know the arithmetic average return for the period is:

• A)positive but less than the geometric average return.
• B)less than the geometric return and could be negative, zero, or positive.
• C)equal to the geometric average return.
• D)either equal to or greater than the geometric average return.
• E)greater than the geometric average return.

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Definitions:

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, representing the benefit received from the purchase.

World Price

The international market price of a good or service, influenced by global supply and demand.

Free Trade

An economic policy that allows goods and services to be bought and sold across international borders with little to no government tariffs, quotas, subsidies, or prohibitions to inhibit exchange.

Consumer Surplus

The contrast between the potential payment by consumers for a product or service and their real expenditure.