Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Explain the difference between an arithmetic average return and a geometric average return. Are both useful? If so, explain why? (Select the best choice

Explain the difference between an arithmetic average return and a geometric average return. Are both useful? If so, expla 

Explain the difference between an "arithmetic average return" and a "geometric average return." Are both useful? If so, explain why? (Select the best choice below.) ... A. The arithmetic average return is the best estimate of what you would earn in the future, so this is the number you care about. The geometric average return is useless. B. The geometric average return is what you would have actually achieved if you had held the stock, so this is the number you care about. The arithmetic average return is useless. C. Both numbers are useful. The geometric average return tells you what you would actually make if you held the stock over this period. You can use the arithmetic average return over the period as an estimate of the expected return. If you use this estimate, it is what you would expect to make in the next period. D. There is no difference between arithmetic and geometric average returns. The two are just different methods to get the same answer.

Step by Step Solution

3.33 Rating (150 Votes )

There are 3 Steps involved in it

Step: 1

C Both numbers are useful The geometric average return tells you what you would actually make if you ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Physics

Authors: David Young, Shane Stadler

10th edition

1118486897, 978-1118836873, 1118836871, 978-1118899205, 1118899202, 978-1118486894

More Books

Students also viewed these Finance questions