Suppose That Over the Last 20 Years,company XYZ Has Averaged

question 59

Multiple Choice

Suppose that over the last 20 years,company XYZ has averaged a return of 13%.Over the same period,the Treasury bond rate has averaged 4%.The current estimate of the Treasury bond rate is 6.5%.Using the historical approach,what is the estimate of XYZ's expected return.

• A) 13.0%
• B) 16.5%
• C) 15.5%
• D) 19.5%

---

Definitions:

Allowance Account

A contra-asset account used to estimate and offset losses from potentially uncollectible accounts receivable.

Debit Balance

An accounting entry that represents a situation where debits exceed credits in an account, indicative of assets or expenses.

Adjusting Entry

A journal entry made in accounting records to update the balances of accounts at the end of an accounting period, ensuring that revenues and expenses are matched accurately.

Aging

A method used to categorize and manage accounts receivable based on the length of time they have been outstanding.