An Asset Had Annual Returns of 17,-35,-18,24,and 6 Percent,respectively,over the Past

question 18

Multiple Choice

An asset had annual returns of 17,-35,-18,24,and 6 percent,respectively,over the past five years.What is the arithmetic average return?

• A) -1.2 percent
• B) 0.8 percent
• C) 1.2 percent
• D) 1.6 percent
• E) 2.3 percent

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Definitions:

Semi-annually

Occurring twice a year.

Effective Annual Yield

Annualized interest rate on a security computed using compound interest techniques.

Yield Curve

A graph that shows the relationship between the interest rates and the maturity dates of debt securities issued by the same issuer.

Liquidity Premiums

Additional yield that investors require to hold securities with lower liquidity, compensating them for the higher cost and difficulty of trading such securities.