You Own a Stock That Has Produced an Arithmetic Average

question 104

Multiple Choice

You own a stock that has produced an arithmetic average return of 5.6 percent over the past five years.The annual returns for the first four years were 15,10,-18,and 8 percent,respectively.What was the rate of return on the stock in year five?

• A) -5.00 percent
• B) 2.75 percent
• C) 6.25 percent
• D) 13.00 percent
• E) 32.00 percent

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Definitions:

Absorption Costing

A financial accounting approach that encompasses all expenses of manufacturing, like direct materials, direct labor, along with variable and fixed overhead costs, into the pricing of a product.

Product Cost

The total expense incurred to produce a product, including direct materials, direct labor, and overhead costs.

Incremental Loss

The additional loss incurred from producing one extra unit of a product or service beyond the break-even point.

Special Order

An order for a product that is made to a customer's specifications, differing from regular stock products.