10 a

(Solving a comprehensive problem) Use the end-of-year stock price data in the popup window, , to answar the following questions for the Harris and Pinwheel companies. a. Compute the annual rates of retum for each time period and for both firms: b. Calculate both the arithmetic and the geometric mean rates of retum for the entire three-year period using yoor annual rates of rotum from part a. (Noto: you may assume that neither firm pays any dividends.) c. Compute a three-year rate of retum spanning the entire period (i.e., using the ending price for periedi 1 and ending price for period 4). d. Since the rate of retum calculated in part c is a three-year rate of retum, convert it to an annual rate of retum by using the following equation: (Throe-YearRateofReturn)=(AnnualRateofReturn)3 e. How is the annual rate of retum calculated in part d related to the geometric rate of return? When you are evaluating the performance of an investment that has been held for several yoars, what type of avorage rate of return (arithmetic or goonetric) should you use? Why? a. Enler the annust rate of retum for each year for Harris in the table below. (Round to two decimal places.)