A stock had returns of 12 percent, 16 percent, 10 percent, 19 percent, 15 percent, and -6 percent over the last six years.

A stock had returns of 12 percent, 16 percent, 10 percent, 19 percent, 15 percent, and -6 percent over the last six years. What is the geometric average return on the stock for this period?    A.  10.90 percent B.  10.68 percent C.  13.56 percent D.  14.76 percent E.  15.01 percent Geometric average = (1.12 × 1.16 × 1.10 × 1.19 × 1.15 × 0.94)1/6 - 1 = 10.68 percent

92.

Assume that the returns from an asset are normally distributed. The average annual return for the asset is 18.1 percent and the standard deviation of the returns is 32.5 percent. What is the approximate probability that your money will triple in value in a single year?    A.  less than 0.5 percent B.  less than 1 percent but greater than 0.5 percent C.  less then 2.5 percent but greater than 1 percent D.  less than 5 percent but greater than 2.5 percent E.  less than 10 percent but greater than 5 percent The upper tail of the 99 percent range = 0.181 + (3 × 0.325) = 1.156 = 115.6 percent, which is less than the 200 percent required to triple your money. Thus, the probability of occurrence is less than 0.5 percent.

93.

Over a 30-year period an asset had an arithmetic return of 13 percent and a geometric return of 10.5 percent. Using Blume's formula, what is your best estimate of the future annual returns over the next 5 years?    A.  11.18 percent B.  12.27 percent C.  11.84 percent D.  12.66 percent E.  12.46 percent