Question

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.

Answer #1

To compute the average return forecasts, let us assume that the current price of APPLE is $100.

To compute the forecast for "y" years into the future, we do this :

- Arithmetic average return : $100 * (1+ 0.0925) ^ y
- Geometric average return : $100 * (1+ 0.082) ^ y

**Average return
forecasts :**

Arithmetic mean forecast | Geometric mean forecast | |

1 Year | 108.20 | 109.25 |

3 Years | 126.67 | 130.40 |

7 Years | 173.62 | 185.76 |

10 Years | 219.92 | 242.22 |

20 Years | 483.67 | 586.72 |

Question 6 (1 point)
The average compound return earned per year over a multiyear
period is called the _____ average return
Question 6 options:
Arithmetic
Geometric
Standard
Variant
Real
Question 7 (1 point)
The average compound return earned per year over a multiyear
period is called the _____ average return
Question 7 options:
Variant
Geometric
Arithmetic
Real
Standard
Question 8 (1 point)
The return earned in an average year over a multiyear period is
called the _____ average return.
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