A- All of the following statements are correct regarding the geometric mean, except:

a. it is more appropriate for a Buy-and Hold strategy, since the base value changes from period to period

b. is usually equal to or less than the arithmetic average due to the effect of compound interest

c. It does not take into account the effect of interest on interest or the effect of compounding.

d. equals the return per period that can result in the cumulative return for a sequence of returns earned

B-

According to the CAPM, the required return for a portfolio with a beta coefficient of 1.05, T-bills = 1.25% and a market return of 7.8%, is:

a. 8.00%

b. 8.19%

c. 9.44%

d. 8.13%