The Geometric Return on an Asset Over the Past 12

question 12

Multiple Choice

The geometric return on an asset over the past 12 years has been 13.47 percent.The arithmetic return over the same period was 13.86 percent.What is the best estimate of the average return on this asset over the next 5 years?

• A)13.47 percent
• B)13.67 percent
• C)13.72 percent
• D)13.81 percent
• E)13.86 percent

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Definitions:

Increase

A situation where there is a rise in magnitude, quantity, or degree.

Quantity Demanded

A specific quantity of a good that buyers are interested in purchasing at a certain price point.

Law of Demand

The principle that, ceteris paribus, there is an inverse relationship between the price of a good and the quantity demanded.

Quantity Demanded

The amount of a product or service consumers are willing to buy at a given price.