Leeanne Owns a Stock That Has an Average Geometric Return

question 34

Multiple Choice

Leeanne owns a stock that has an average geometric return of 12.30 percent and an average arithmetic return of 12.55 percent over the past six years.What average annual rate of return should Leeanne expect to earn over the next four years?

• A) 12.38 percent
• B) 12.40 percent
• C) 12.44 percent
• D) 12.47 percent
• E) 12.51 percent

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Definitions:

Technological Improvement

Enhancements or advancements in technology that increase productivity, efficiency, or quality in the production of goods and services.

Marginal Product

The additional output that results from using one more unit of a production input, holding all other inputs constant.

Demand for Resource

The desire and ability of producers to employ resources in the production process, influenced by those resources' productivity and the market price of the final product.

Complementary Input

Inputs or resources that enhance or are necessary for the use of another good or service, often leading to increased demand for both when one is more widely available or cheaper.