In: Finance
Which of the following would be most useful as an estimate of the expected return for an investment over the next year, if you believe that historical returns are a good indication of future returns?
Select one:
a. None of the responses are correct.
b. Geometric Average Realised Return
c. Arithmetic Average Realised Return
d. Both (i) Arithmetic Average Realised Return and (ii) Geometric Average Realised Return
Option B is correct
Geometric Average Realised Return would be most useful as an
estimate of the expected return for an investment over the next
year, if you believe that historical returns are a good indication
of future returns