Suppose You Own Two Stocks, a and B in Year

question 75

Multiple Choice

Suppose you own two stocks, A and B In year 1, stock A earns a 2% return and stock B earns a 9% return. In year 2, stock A earns an 18% return and stock B earns an 11% return. Which stock has the higher geometric average return?

• A) Stock A
• B) Stock B
• C) The two stocks have the same geometric average return.
• D) At least three periods are needed to calculate the geometric average return.

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Definitions:

Relative Deprivation

The feeling of dissatisfaction or injustice from perceiving oneself as worse off compared to others.

Satisfaction

A feeling of pleasure or fulfillment resulting from achieving a desire or need.

Behavioral Contrast

A phenomenon observed in operant conditioning where an increase in the reinforcing value of one behavior leads to a decrease in the reinforcing value of another behavior.

Divestiture

The process of a company selling off its assets, investments, or divisions as a strategic move to focus on the core operations or to generate capital.