The geometric return on an asset over the past 12 years has been 13.47 percent.The arithmetic return over the same period was 13.86 percent.What is the best estimate of the average return on this asset over the next 5 years?
A)13.47 percent
B)13.67 percent
C)13.72 percent
D)13.81 percent
E)13.86 percent

Question

Quizplus · Accepted Answer

Projected return = {[(5 - 1)/(12 - 1)] × .1347} + {[(12 - 5)/(12 - 1)] × .1386} = 13.72 percent

The Geometric Return on an Asset Over the Past 12