Question

Over a 50 year period an asset had an arithmetic return of 12.1
percent and geometric return of 10 percent.

Musing Blume’s formula, what is your best estimate of the
future annual returns over 10 years? 15 years? 25 years?

Answer #1

Blume's Formula -

where, T = No. of forecast/ future years, N = no. of historic/ observed periods

*T = 10 years*

**or
11.71%**

*T = 15 years*

*%*

*T = 25 years*

*
or 11.07%*

You have found an asset with an arithmetic average return of
13.60 percent and a geometric average return of 10.44 percent. Your
observation period is 30 years. What is your best estimate of the
return of the asset over the next 5 years? 10 years? 20 years?
(Do not round intermediate calculations. Enter your answers
as a percent rounded to 2 decimal places.)

Consider the following five monthly returns. The arithmetic
average monthly return over this period is 1.40% and the geometric
average monthly return over this period is 1.33%. Explain the
difference between the arithmetic average return and the geometric
average return. Are both numbers useful? If so, explain why?
3% -1% 2% 7% -4%
Choose the correct answer below.
Both numbers are useful. The geometric average return tells you
what you would actually make if you held the stock over this...

Over the 10 year period from 2001-2018, the geometric average
return for APPLE was 8.2 % and the arithmetic average return was
9.25 %. Compute average return forecasts for 1, 3, 7, 10, and 20
years into the futures.

A stock has had returns of 12 percent, 19 percent, 21 percent,
21 percent, -12 percent, 26 percent, and -5 percent over the last
six years.
What are the arithmetic and geometric returns for the stock? (Do
not round intermediate calculations and enter your answers as a
percent rounded to 2 decimal places.)
a.) Arithmetic return?
b) Geometric return?

A stock has annual returns of 7.4 percent, 15.8 percent, -16.4
percent, 12.1 percent, and 22.2 percent for the past five years.
What is the geometric average return for the period is _____
percent. Show your answer to the nearest .01%, do not use the %
sign in your answer. If the answer is negative, use the - sign.

A stock had returns of 16 percent, 12 percent, 19 percent, 17
percent, 18 percent, and -1 percent over the last six years.
What is the arithmetic return for the stock?
What is the geometric return for the stock?

A stock produced returns of 14 percent, 17 percent, and −10
percent over three of the past four years, respectively. The
arithmetic average for the past four years is 6 percent.
Show you work here (be as detailed and organized as
possible):
What is the missing return (i.e., the return in the fourth
year)?
What is the geometric average return over the four years?
What is the standard deviation of returns of the stock? Show
your work clearly below.

1.
Over a particular period, an asset had an average return of 6.9
percent and a standard deviation of 9.9 percent.
What range of returns would you expect to see 95 percent of the
time for this asset? (A negative answer should be indicated
by a minus sign. Input your answers from lowest to highest to
receive credit for your answers. Do not round intermediate
calculations and enter your answers as a percent rounded to 2
decimal places, e.g., 32.16.)...

You observe the following annual rates of return over the
previous 6 years:
Year
Rate of return
1
20%
2
30%
3
10%
4
-40%
5
-20%
6
30%
What is the arithmetic annual average return? Please state your
answer in percentage form with two digits after the decimal, e.g.,
10.00 represents 10%.
What is the geometric annual average return? ? Please state your
answer in percentage form with two digits after the decimal, e.g.,
10.00 represents 10%.
If...

8.
A stock had returns of 16.11 percent, 23.82 percent, −11.53
percent, and 9.58 percent over four of the past five years. The
arithmetic average return over the five years was 13.16 percent.
What was the stock return for the missing year?
9. A stock had returns of 17.59 percent, −7.11 percent, and
23.81 percent for the past three years. What is the standard
deviation of the returns?

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