a Rate of Retum / 1+ (Solving a comprehensive problem) Use the end-of-year stock price data in the popup window, to answer the following questions for the Harris and Pinwheel companies. BE 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 (.e., using the ending price for period 1 and ending price for period 4). d. Since the rate of return calculated in partc is a three-year rate of return, convert it to an annual rate of return by using the following equation: Three-Year Annual Rate 1 + of Return a. Enter the annual rate of return for each year for Harris in the table below. (Round to two decimal places.) bool Time Data Table Rate turn 1 2. 3 Time 4 1 Harris $11 10 13 16 2 3 4 Pinwheel $17 33 28 25 Enter the annud Time Rate bturn Print Done Click to select thegg right etv A ) 0 + L 7 8 9 delete } U 0 P { [ 1 TS Test 19 pts possible hapa none! 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 fim pays any dividends.) c. Compute a three-year rate of return spanning the entire period (ie., using the ending price for period 1 and ending price for period 4). d. Since the rate of return calculated in partc is a three-year rate of return, convert it to an annual rate of return by using the following equation: 88-3 theo Three-Year Rate of Retum -).( 1 + Annual Rate of Return axtboo .. 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 a. Enter the annual rate of return for each year for Harris in the table below. (Round to two decimal places.) Time Annual Rate of Return Annual Rate of Return 1 2 Value of Harris Stock $11 10 13 16 Value of nwheel Stock $17 33 % 3 % 28 25 4 ndation 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 Annual Rate of Return Click to select your answer(s). -p Chegg elp right 10 tv ll Il + ( 9 ) 0 Il 7 00 delete 1 0 { [ ] 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? Enter the annual rate of return for each year for Pinwheel in the table below. (Round to two decimal places.) Time Annual Rate of Return Value of Harris Stock $11 10 1 2 Value of Pinwheel Stock $17 33 Annual Rate of Return 3 13 - 9.09% 30.00% 23.08% % % 4 16 28 25 % b. The arithmetic average rate of retum eamed by investing in Harris stock over this period is % (Round to two decimal places) The arithmetic average rate of return earned by investing in Pinwheel stock over this period is % (Round to two Click to select your answers). megg ght dv A 4 MacBook ) & ( 9 delete O 7 8 o { [ U } 1 J K L retu
