The geometric return on a stock over the past 10 years was 7.9 percent.The arithmetic return over the same period was 8.8 percent.What is the best estimate of the average return on this stock over the next 5 years?
A) 8.40 percent
B) 9.05 percent
C) 9.08 percent
D) 9.13 percent
E) 9.47 percent

Question

Quizplus · Accepted Answer

Projected return = {[(5 - 1) / (10 - 1)] × 0.0790} + {[(10 - 5) / (10 - 1)] × 0.0880} = 8.40 percent

The Geometric Return on a Stock Over the Past 10