A Stock Had Returns of 6%,13%,-11%,and 17% Over the Past

question 45

Multiple Choice

A stock had returns of 6%,13%,-11%,and 17% over the past four years. What is the geometric average return for this time period?

• A) 4.5%
• B) 5.7%
• C) 6.2%
• D) 7.3%
• E) 8.2%

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Definitions:

Residual Value

The estimated amount that an asset is worth at the end of its useful life.

Net Income

What a company ultimately makes, after subtracting everything it spends including taxes and costs, from the revenue it generates.

Average Rate

The mean rate or level for a particular variable over a specified period, often used in reference to interest or exchange rates.

Present Value Methods

Techniques used to determine the current worth of a future stream of cash flows, discounted at a particular rate.