Answer:
Blume's formula combines the geometric and arithmetic means of an asset to be able to predict its returns in a given period.
The formula is;
= Geometric Mean*(T-1)/(N-1) + Arithmatic Mean *(N-T)/(N-1)
Where,
T = Period in question
N = Total period
6 years
= 10.3%*(6-1)/(38-1) + 12.4%*(38-6)/(38-1)
= 12.1 %
10 years
= 10.3%*(10-1)/(38-1) + 12.4%*(38-10)/(38-1)
= 11.89%
19 years
= 10.3%*(19-1)/(38-1) + 12.4%*(38-19)/(38-1)
= 11.38%
