The Geometric Return on a Stock Over the Past 10

question 13

Multiple Choice

The geometric return on a stock over the past 10 years was 8.42 percent. The arithmetic return over the same period was 9.02 percent. What is the best estimate of the average return on this stock over the next 5 years?

• A) 8.75 percent
• B) 9.05 percent
• C) 9.08 percent
• D) 9.13 percent
• E) 9.47 percent

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Definitions:

Outside Supplier

A third-party entity that provides goods or services to a company, which are not produced in-house.

Contribution Margin

The amount by which sales revenue exceeds variable costs of production, indicating how much revenue contributes to fixed costs and profits.

Motor Division

A specialized department or subsidiary within a company focused on the development and manufacturing of engines or motor vehicles.

Maximum Price

The highest price that can be charged for a product or service, often set by regulatory authorities or by market conditions.