ABCD stock price and dividend history are as follows:

An investor buys three shares of ABCD at the beginning of 2013, buys another two shares at the beginning of 2014, sells one share at the beginning of 2015, and sells all four remaining shares at the beginning of 2016. a. What are the arithmetic and geometric average rates of return? b. What is the dollar-weighted rate of return? (Hint: Calculate cash flows for the four dates corresponding to the turns of the year for January 1, 2013, to January 1, 2016 and compute the IRR). c. Which return measure is most relevant to the buy-and-hold investor? Which is most relevant to the ABCD investor who trades each year? Explain.

Dividend Paid at Year End S2 S2 $2 $2 Beginning-of Year 2013 2014 2015 2016 Year Price S70 S80 S80 S75