An asset has had an arithmetic return of 10.2 percent and a geometric return of

Question

An asset has had an arithmetic return of 10.2 percent and a geometric return of 8.2 percent over the last 88 years. What return would you estimate for this asset over the next 9 years? 24 years? 40 years? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

An asset has had an arithmetic return of 10.2 percent and a geometric return of 8.2 percent over the last 88 years. What return would you estimate for this asset over the next 9 years? 24 years? 40 years? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Explanation / Answer

ARITHMETIC RETURN=10.2%

GEOMETRIC RETURN=8.2%

RETURN FOR THIS ASSET OVER NEXT 9 YEARS=(10.2*9+8.2*9)/2=82.8%

OVER NEXT 24 YEARS=(10.2*24+8.2*24)/2=220.8%

OVER NEXT 40 YEARS=(10.2*40+8.2*40)/2=368%

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