Sara Would Like to Evaluate the Performance of Her Portfolio

question 18

Multiple Choice

Sara would like to evaluate the performance of her portfolio over the past 10 years. What compound annual rate of return has she achieved if she invested $12,000 ten years ago and now has $25,000?

• A) Between 4% and 6%
• B) Above 10%
• C) Between 8% and 10%
• D) Between 6% and 8%

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Definitions:

Stock Index

An indicator used to measure and report value changes in a selection of stocks, which represents a specific segment of the stock market.

Risk-Free Rate

The expected yield from an investment that carries no risk, commonly exemplified by state bonds.

Dividend

A portion of a company's earnings distributed to its shareholders, typically in the form of cash or additional shares.

Cash Settlement

The provision of some futures contracts that requires not delivery of the underlying assets but settlement according to the cash value of the asset.