a. Compute the annual rates of return for each time period and for both firms.

b. Calculate both the arithmetic and the geometric mean rates of return for the entire three-year period using your annual rates of return from part a. (Note: you may assume that neither firm pays any dividends.)

c. Compute a three-year rate of return spanning the entire period (i.e., using the ending price for period 1 and ending price for period 4).

d. Since the rate of return calculated in part c is a three-year rate of return, convert it to an annual rate of return by using the following equation:

e. How is the annual rate of return 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 years, what type of average rate of return (arithmetic or geometric) should you use? Why?

a. Enter the annual rate of return for each year for Harris in the table below

(Solving a comprehensive problem) Use the end-of-year stock price data in the popup window. 3. to answer the following questions for the Harris and Pinwheel companies. a. Compute the annual rates of return for each time period and for both firms. b. Calculate both the arithmetic and the geometric mean rates of return for the entire three-year period using your annual rates of return from part a. (Note: you may assume that neither firm pays any dividends.) G. Compute a three-year rate of return spanning the entire period (i.e., using the ending price for period 1 and ending price for period 4). d. Since the rate of retum calculated in partc is a three-year rate of retum, convert it to an annual rate of return by using the following equation: . Three-Year Rate of Return Annual Rate of Retum e. How is the annual rate of return 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 years, what type of average rate of return (arithmetic or geometric) should you use? Why? a. Enter the annual rate of return for each year for Harris in the table below. (Round to two decimal places.) Time Value of Harris Stock Annual Rate of Return Value of Pinwheel Stock $20 Annual Rate of Retum - 12.5% 85.71 % 30.77 % 30 23 Enter the annual rate of return for each year for Pinwheel in the table below. (Round to two decimal places.) Time Value of Harris Stock Annual Rate of Return Value of Pinwheel Stock S20 Annual Rate of Retum 35 - 12.50% 85.71% 30.77% 75 % - 14.28 % - 23.33 % b. The arithmetic average rate of return earned by investing in Harris stock over this period is % (Round to two decimal places.) Enter your answer in the answer box and then click Check Answer. Cometheu s frumforschend and for both Come of the period in the ending prop r Rate of Retu n Da bi Enter your with and the Check 11