Lisa Owns a Stock That Has an Average Geometric Return

question 42

Multiple Choice

Lisa owns a stock that has an average geometric return of 11.34 percent and an average arithmetic return of 11.51 percent over the past six years.What average annual rate of return should Lisa expect to earn over the next four years?

• A)11.38 percent
• B)11.41 percent
• C)11.44 percent
• D)11.47 percent
• E)11.51 percent

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Definitions:

General Ledger Control Account

A General Ledger Control Account is a summary account that consolidates the total balances of all accounts in a subsidiary ledger, used to maintain integrity in financial reporting.

Subsidiary Ledger

A detailed ledger that contains the individual accounts with a common characteristic, supporting entries recorded in a general ledger.

Accounting Period

The span of time at the end of which a company's financial statements are prepared, typically a quarter or year.

Cost Effectiveness

A measure of the economic efficiency in terms of the cost incurred for a given outcome or result.