The Geometric Average Annual Return for a Large Capitalization Stock

question 43

Multiple Choice

The geometric average annual return for a large capitalization stock portfolio is 12% for ten years and 5% per year for the next five years.The geometric average annual return for the entire 15-year period is:

• A)9.95%
• B)9.62%
• C)9.11%
• D)10.23%
• E)10.97%

---

Definitions:

Par

The face value of a bond or other financial instrument, which is the amount to be paid to the holder at maturity.

HPR

Holding Period Return, a measure of the total return received from holding an asset or portfolio of assets over a specified period of time.

Dividend

A portion of a company's earnings distributed to its shareholders, typically in the form of cash payments or additional shares.

Dollar-Weighted Return

A method of calculating an investment's return that considers the timing and amount of each investment or withdrawal made.