The Value Line Index Is an Equally-Weighted Geometric Average of the Returns

question 53

Multiple Choice

The Value Line Index is an equally-weighted geometric average of the returns of about 1,700 firms. 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 32%, 5%, and −10%, respectively, is

• A) 4.3%.
• B) 7.6%.
• C) 9.0%.
• D) 13.4%.
• E) 5.0%.

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Definitions:

Equilibrium Exchange Rate

The exchange rate at which the demand for a currency equals its supply in the foreign exchange market, resulting in a stable market price.

Euros

The official currency of the Eurozone, which is used by 19 of the 27 European Union countries, known collectively as the Euro area.

Foreign Currencies

The currencies of other countries, used for conducting international transactions or as an investment.

Bonds

Fixed-income investments representing loans made by an investor to a borrower, typically corporate or governmental, which include terms for fixed interest payments and the eventual return of principal.