If an Investor Buys a Stock and Holds It for Three

question 5

Multiple Choice

If an investor buys a stock and holds it for three years, earning 15% for the first year; negative 15% for the second; and 12% for the third, what was the annual geometric return?

• A) 3.1%
• B) 3.75%
• C) 4.11%
• D) 5.66%

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Definitions:

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within a year or within the business's operating cycle, whichever is longer.

Net Working Capital

The gap between a firm's current assets and its current liabilities, showcasing its operational effectiveness and short-term financial stability.

Current Liabilities

Obligations that a company needs to pay within a year.

Net Working Capital

The gap between a firm's present assets and its current obligations, signalling its short-term economic condition.