Question: As Table 6-6 shows, the geometric mean return for stocks over a long period has been 9.6 percent. Thus, on average, on a compound basis,

As Table 6-6 shows, the geometric mean return for over a long period has been 9.6 percent. Thus, on average, on a compound basis, have averaged a 9.6 percent total return per year over a long time period. Should investors be surprised if they hold for a 10-year period, or a 15-year period, and earn an average return of only 1 or 2 percent?

Step by Step Solution

★★★★★

3.29 Rating (170 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

No Although the longrun average where longrun is on the order of 7... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

650-B-A-I (7331).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

During the past five years, you owned two stocks that had the following annual rates of return: a. Compute the arithmetic mean annual rate of return for each stock. Which stock is most desirable by...

In the current interest rate environment, using a required return estimate based on the short - term government bond rate and a historical equity risk premium defined in terms of a short - term...

Common stock issues in this market with average systematic risk are most likely to have required rates of return A. Between 2 percent and 7 percent. B. Between 7 and 9 percent. C. At 9 percent or...

Hello, I am having difficulty trying to understand these questions. I need a tutor to HELP me understand and solve these highlighted Questions. I need you to EXPLAIN to me STEP BY STEP how you got...

6.1 Calculate the return and the return relative for the following assets: A preferred stock bought for $70 per share, held one year during which $5 per share dividends are collected, and sold for...

6 | Consumer Choices Figure 6.1 Investment Choices Higher education is generally viewed as a good investment, if one can afford it, regardless of the state of the economy. (Credit: modification of...

1. Assume stocks A and B have had identical stock prices every day for the past three years. Stock A pays a dividend but Stock B does not. Which one of these statements applies to these stocks for...

ITEM #1 LEARNING FROM THE HEADLINES True to the Learning from the Headlines approach of this course, watch the Part Three Intro Video after you read the short article the video highlights. Notice...

Lecture Notes DL MGT 5100 - Distribution Management Spring 2017 1.0. Day one, Monday, Monday, 9 Jan 17 1.1. Reading Assignments: Chapters 1 and 2 1.1.1. I intend to follow the book so as to provide a...

A chute for delivering shipments of freight is so designed that the boxes starting from rest, receive a uniform acceleration of 18ft/s2 on the first section, which is 18ft long. Then they are...

Go to the books companion website and use information found there to answer the following questions related to Cadbury and Nestl. Instructions (a) What method of computing net cash provided by...

21. LO.1 On April 21, 2011, Crow Corporation acquired land and equipment in a 351 transaction. At that time, the land had a basis of $300,000 and a fair market value of $225,000, and the equipment...

A business with two or more co-owners that is not organized as a corporation is called a a. partnership b. limited partnership c. limited liability company d. corporation

Assume an investor sells short 200 shares of stock at $75 per share. At what price must the investor cover the short sale in order to realize a gross profit of $5,000? $1,000?

Explain the margin process, distinguishing between initial margin and maintenance margin. Who sets these margins?

What conditions result in an account being "restricted"? What prompts a margin call?

Under the Liquidity Premium Theory, if today's one year spot rate is 4%, the forward one-year rate in one year is 6%, and the liquidity premium on a 2-year bond is 0.25%, today's 2-year spot rate...

Question 1 Brangelina Adoption Agencys general ledger shows a cash balance of $11,675. The balance of cash in the March-end bank statement is $7,347. A review of the bank statement reveals the...

You own the following portfolio of stocks. What is the portfolio weight of stock C? Stock Number of Shares Price per Share A 120 $28 B 710 $24 C 400 $48 D 220 $47 61.55 percent 20.70 percent 54.82...