You Have Calculated the Historical Dollar-Weighted Return, Annual Geometric Average

question 38

Multiple Choice

You have calculated the historical dollar-weighted return, annual geometric average return, and annual arithmetic average return. You always reinvest your dividends and interest earned on the portfolio. Which method provides the best measure of the actual average historical performance of the investments you have chosen?

• A) dollar-weighted return
• B) geometric average return
• C) arithmetic average return
• D) index return

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Definitions:

Proprietorship

A business owned by one person.

Partnership

A business owned by two or more persons associated as partners.

Return on Equity

Return on Equity (ROE) measures a company's profitability by revealing how much profit a company generates with the money shareholders have invested.

Net Income

This is the amount of earnings left after all expenses and taxes have been subtracted from revenue.