Calculate the arithmetic average return

Reference no: EM13751253

Problem: Consider the rate of return of stocks ABC and XYZ

Year	ABC	XYZ
1	22%	38%
2	9	11
3	19	19
4	6	0
5	1	-1

a. Calculate the arithmetic average return on these stocks over the sample period.

b. Which stock has greater dispersion around the mean?

c. Calculate the geometric average returns of each stock.

d-1. if you were equally likely to earn a return of 22%, 9%, 19%, 6% or 1%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return?

d-2. If you were equally likely to earn a return of 38%, 11%, 19%, 0%, or -11%, in each year (these are the five annual returns for stock XYZ), what would be your expected rate of return?

Reference no: EM13751253

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