If an investor holds shares for three years, the value at the end of three years will always be the initial cost of the shares times (1 + arithmetic average return)to the third power.

Question

Quizplus · Accepted Answer

The value at the end of three years will depend on the actual returns earned during those three years, which may be higher or lower than the arithmetic average return. Therefore, the formula given in the statement is not always true.

If an Investor Holds Shares for Three Years, the Value