Estimates of the Rate of Return on a Security Based

Multiple Choice

Estimates of the rate of return on a security based on a historical arithmetic average will probably tend to _____ the expected return for the long-term and estimates using the historical geometric average will probably tend to _____ the expected return for the short-term.

A) overestimate; overestimate
B) overestimate; underestimate
C) underestimate; overestimate
D) underestimate; underestimate
E) accurately; accurately