Explain the differences between the arithmetic return and the geometric return. Include in your explanation what factor
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Question:
- Explain the differences between the arithmetic return and the geometric return. Include in your explanation what factor determines the difference between arithmetic returns and geometric (compounded) returns.
- If you own a stock with volatile returns over a 2-year period, will the average return be higher or lower than the geometric return? Explain why.
- Why is it more convenient to display your investment returns in percentage terms rather than dollar terms?
- Would a common stock or a corporate bond demand a higher risk premium? Explain why.
- What are the differences between a bond risk premium and an equity risk premium?
- Explain whether it is possible to earn excess returns without taking on additional risk.
Related Book For
Accounting Principles Part 1
ISBN: 978-1118306789
6th Canadian edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow
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