A stock earned annual returns of 11%, -6%, 9%, and 14% for the last four years.

(a) What is the arithmetic average return for the stock over the last four years?

(b) What is the standard deviation of the returns over the last four years?

(c) What is the geometric average return for the stock over the last four years?

(d) What is the holding period return for the stock over the last four years?

(e) What would have been your holding period return if you had earned the arithmetic average return every year for the last four years?

(f) What would have been your holding period return if you had earned the geometric average return every year for the last four years?

g) Compare your answers for the holding period returns in parts (e) and (f) with the actual holding period return part (d) and comment on which average (arithmetic or geometric) is better indicator of longer-term returns.