Reference no: EM132629269
1. You experience returns of 40% then -20%. What is your arithmetic and geometric annual rateof return?
a. Arithmetic is 10% and geometric is less than 10%. b. Arithmetic and geometric is 10%.
c. Arithmetic is 10% and geometric is greater than 10%.
d. Geometric is 10% and arithmetic is less than 10%.
2. Which one of the following measures time-weighted returns and allows for compounding?
A geometric return B Arithmetic return C Dollar-weighted return D Historical average return
Use the following to answer questions 3, 4 and 5:
Assume you buy $50,000 worth of stock on 50% margin. Assume your borrowing costs are 10% per year and you expect the stock price to go from $100 to $115 over the next year.
3. What is your dollar return after borrowing costs?
A $5,000 B $7,500 C $2,500 D $10,000
4. What is your return on assets (ignore interest)?
A 10% B 5% C 15% D 20%
5. What is your return on equity after borrowing costs?
A 10% B 25% C 15% D 20%
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