Suppose That Over the Last 25 Years,company DEF Has Averaged

question 49

Multiple Choice

Suppose that over the last 25 years,company DEF has averaged a return of 7.5%.Over the same period,the Treasury bond rate has averaged 1.5%.The current estimate of the Treasury bond rate is 4%.Using the historical approach,what is the estimate of DEF's expected return.

• A) 13.0%
• B) 12.5%
• C) 12.0%
• D) 10.0%

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Definitions:

Linear Equation

A linear equation is an algebraic equation in which each term is either a constant or the product of a constant and a single variable, and the graph forms a straight line.

Solve

The process of finding the values that satisfy an equation or a system of equations.

Proportion

A statement that two ratios or fractions are equal.