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10 October, 04:57

The geometric return on an asset over the past 12 years has been 14.50 percent. The arithmetic return over the same period was 14.96 percent. What is the best estimate of the average return on this asset over the next 5 years?

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  1. 10 October, 05:14
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    The Average return on this asset over the next 5 years = 14.79 percent

    Explanation:

    using below mentioned calculation:

    = ((5-1) / (12-1) * 0.145) + ((12-5) / (12-1) * 0.1496)

    =0.1479 or 14.79%.
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