The Value Line Index Is an Equally Weighted Geometric Average

question 22

Multiple Choice

The Value Line Index is an equally weighted geometric average of the return of about 1,700 firms.What is the value of an index based on the geometric average returns of three stocks,where the returns on the three stocks during a given period were 20%,-10%,and 5%?

• A) 4.3%
• B) 5.0%
• C) 11.7%
• D) 13.4%
• E) 12.2%

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Definitions:

Premium on Bonds Payable

The amount by which a bond's selling price exceeds its principal amount or face value.

Stated Interest

The interest rate declared on a bond or loan, which does not account for compounding.

Bonds Issued

Long-term debt instruments issued by corporations or governmental entities to investors to raise capital, with a promise to pay back the principal along with interest.

Face Value

The nominal value printed on a bond or share, representing its legal value rather than market value.