Over the last four years, a stock has had an arithmetic average return of 8.8 pe
ID: 2740849 • Letter: O
Question
Over the last four years, a stock has had an arithmetic average return of 8.8 percent. Three of those four years produced returns of 16.3 percent, 10.2 percent, and -14.1 percent. What is the geometric average return for this 4-year period? Select one:
a. 9.97 percent b. 9.40 percent Incorrect c. 8.39 percent d. 7.83 percent e. 8.67 percent
A stock produced returns of 16 percent, 9 percent, and 21 percent over three of the past four years. The arithmetic average for the past four years is 10 percent. What is the standard deviation of the stock's returns for the 4-year period?
Select one:
a. 9.09 percent
b. 10.83 percent
c. 11.75 percent
d. 8.54 percent
e. 6.82 percent
An efficient capital market is best defined as a market in which security prices reflect which one of the following?
Select one:
a. Current inflation
b. The historical arithmetic rate of return
c. Available information
d. The historical geometric rate of return
e. A risk premium
Explanation / Answer
1) option:d - 7.83%
solution : caluclation of 4th year return using average mean
(16.3+10.2-14.1+x )/4 = 8.8
X= 22.8%- 4th year return
Caluclation of geometric average
2) option:- b 10.83% approx because on solving i got 10.17%
10.17%
3) option:- c Available information
Efficient market theory is that all market participants receive and act on all the relevant information as soon as it becomes available in the stock market.There exists three level of efficiency:-
Weak form efficiency:- prices reflect all information found in the record of past prices and volumes
Semi-stong efficiency:- Prices reflect not only all information found in the record of past prices and volumes but also all other publicly available information
Strong form efficiency:- Prices reflect all available information public as well as private.
Return Return+1 0.163 1.16 0.102 1.10 -0.141 0.86 0.228 1.23 7.83% (1.16*1.10*0.86*1.23)^(1/4)-1Related Questions
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