Explain the difference between the average return and the realized return. Are b

Question

Explain the difference between the average return and the realized return. Are both numbers useful? If so, explain why. (Select the best choice below.) A. The realized return is what you would actually make if you hold the investment, so this is the number you care about. The average return is useless. B. Both numbers are useful. The realized return tells you what you would actually make if you held the investment over this period (month or year). You can use the average return over the period as the estimate of the monthly or annual expected return. If you use this estimate, it is what you expect to make on the investment in the next period. C. There is no difference between an average return and a realized return. The two are just different methods to get the same answer. D. One number is the geometric average; the other is the arithmetic average. Only the arithmetic average is useful.

Explanation / Answer

B ) Both the nubers are useful . The realised return tell you about what you would actally make , if you held the investment over his period ( month / years). You can use average retu over the period as a estimate of monthly or annual expected retun. It is waht you expect in make from a investment in the next period . Realised return is the amount of actual gain made on the value of portfolio over a specific period of time Average return in the arihmetic mean of expected returns over a period of time

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