A Stock Has an Arithmetic Average Return of 10

question 32

Multiple Choice

A stock has an arithmetic average return of 10.4% and a geometric average return of 8.8% based on the annual returns for the last 25 years. What is the best estimate of the annual return on this stock over the next 5 years?

• A) 11.04%
• B) 12.68%
• C) 13.01%
• D) 10.13%
• E) 12.87%

---

Definitions:

Internalize Values

The process by which individuals adopt and integrate the values, beliefs, and norms of a group or society as their own.

Intrinsically Rewarding

An activity or task that is fulfilling and satisfying in itself, without the need for external rewards or recognition.

Organizational Socialization

The process by which a new employee learns the norms, values, behaviors, and social knowledge necessary to become an integrated member of an organization.

Task Demands

The specific requirements or challenges associated with a job or task, including the physical and mental effort required.