QUESTION 7 Which of the following statements is correct? OA. The arithmetic average rate of return takes compounding into effect. OB. If an investor earns 10% on her investment in the first year and loses 10% the next year, she will have neither a gain nor a loss. OC. If an investor holds a stock for three years, the value at the end of three years will always be the initial cost of the stock times (1 + arithmetic average return) to the third power. OD. All answer choices are incorrect. OE An investor who wishes to hold a stock for five years will be most interested in the geometric average rather than in the arithmetic average return.