The One-Year Holding Period Returns for Cherokee Adventures for 2010

question 37

Multiple Choice

The one-year holding period returns for Cherokee Adventures for 2010 and 2011 are given below.If Cherokee's geometric average return for 2010 through 2012 was 15 percent, what was its implied one-year holding period return for 2012?

• A) 12.8%
• B) 11.8%
• C) 24.6%
• D) 16.0%
• E) Not enough information is given to answer this question.

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Definitions:

Bonds

These are fixed-income investment products where an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate.

Debt Instruments

Financial assets that represent a debtor's obligation to repay borrowed money or other forms of credit to the creditor according to stated terms.

Original Issue Discount

The difference between the par (face) value of a bond and the lower price at which it was originally sold, which must be reported as interest income over the life of the bond.

Tax-exempt Debt

Debt securities issued by state or municipal governments whose interest payments are exempt from federal income tax, and sometimes state and local taxes.