Question

In: Finance

During the past five years, you owned two stocks that had the following annual rates of...

During the past five years, you owned two stocks that had the following annual rates of return:

Year Stock T Stock B
1 0.17 0.10
2 0.06 0.02
3 -0.06 -0.12
4 -0.04 0.04
5 0.11 0.06
  1. Compute the arithmetic mean annual rate of return for each stock. Round your answers to one decimal place.

    Stock T:   %

    Stock B:   %

    Which stock is most desirable by this measure?

    -Select-Stock TStock BItem 3 is more desirable because the arithmetic mean annual rate of return is -Select-higherlowerItem 4 .

  2. Compute the standard deviation of the annual rate of return for each stock. (Use Chapter 1 Appendix if necessary.) Do not round intermediate calculations. Round your answers to three decimal places.

    Stock T:   %

    Stock B:   %

    By this measure, which is the preferable stock?

    -Select-Stock TStock BItem 7 is the preferable stock.

  3. Compute the coefficient of variation for each stock. (Use the Chapter 1 Appendix if necessary.) Do not round intermediate calculations. Round your answers to four decimal places.

    Stock T:

    Stock B:

    By this relative measure of risk, which stock is preferable?

    -Select-Stock TStock BItem 10 is the preferable stock.

  4. Compute the geometric mean rate of return for each stock. Round your answers to three decimal places.

    Stock T:   %

    Stock B:   %

Solutions

Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

Hope this will help, please do comment if you need any further explanation. Your feedback would be appreciated.


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