Which of the Following Statements Is FALSE

question 45

Multiple Choice

Which of the following statements is FALSE?

• A) The geometric average return is a better description of the long-run historical performance of an investment.
• B) The geometric average return will always be above the arithmetic average return, and the difference grows with the volatility of the annual returns.
• C) The compounded geometric average return is most often used for comparative purposes.
• D) We should use the arithmetic average return when we are trying to estimate an investment's expected return over a future horizon based on its past performance.

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Definitions:

Productivity

The efficiency at which individuals, companies, or economies produce goods and services, usually measured as output per unit of input.

Economic Growth

An increase in the amount of goods and services produced in an economy over a period of time.

Investment

Investment refers to the allocation of resources, usually financial, in order to generate income or profit, including the purchase of assets with the expectation that it will generate payoff in the future.

Advanced Economy

A term used to describe a country with a very high level of economic development, characterized by high-income levels, diversified economic structures, and stable financial markets.