Suppose a Particular Investment Earns an Arithmetic Return of 10

question 45

Multiple Choice

Suppose a particular investment earns an arithmetic return of 10% in year 1, 20% in year 2, and 30% in year 3. The geometric average return for the period will be

• A) greater than the arithmetic average return.
• B) equal to the arithmetic average return.
• C) less than the arithmetic average return.
• D) equal to the market return.
• E) It cannot be determind from the information given.

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