Q 5.23. (Strange) Stock A always alternated between +20% and -10% in the past. Stock B earned 4.5% per annum. 1. What was the average rate of return for stock A? 2. What was the average rate of return for stock B?

3. On a 1-year basis, would a risk-neutral investor pre- fer +20% or -10% with equal probability, or 4.5% for sure? 4. How much would each dollar invested 10 years ago in stock A have earned? 5. How much would each dollar invested 10 years ago in stock B have earned? 6. What is going on here?