Assume we have made the following set of projections regarding the possible rates of return for a company we are analyzing:

State of the Economy Probability Return

Recession 20% 2%

Normal 60% 10%

Boom 20% 20%

What is the expected rate of return for this firm`s stock?

A) 11.6% B) 12.6% C) 12.0% D) 10.4%

The stock price for RIM (Research in Motion), the former maker of the once popular Blackberry smartphone, was quite volatile for several years, before it finally went into free fall in the spring of 2011. According to Yahoo Finance, the closing price for the last trading day of November for each of the listed years was:

	2003	2004	2005	2006	2007	2008
Stock Price As At Nov 30	$87.34	$104.81	$70.86	$158.75	$113.83	$54.50
HPR

First, calculate the one year Holding Period Return for the period ending November 30, 2006.

The Holding Period Return (HPR) for the one-year period ending November 30, 2006 is:

Multiple Choice

• 168%

• - 28%

• 124%

• 131%

For the next three questions (28-30), ASSUME that the one-year HPRs for RIM are:

{20%, -40%, 130%, -25%, -55%}. These are close to but not exactly equal to RIMs actual annual HPRs.

The arithmetic mean of the one-year HPRs for RIM is:

• 14.9%

• 18.5%

• 8.4%

• 6.0%

The geometric mean of the annual one year HPRs for RIM is: (Note: For this question, you must use an algebraic solution, because the HPRs provided above are approximations, not the exact values. If you use your function keys and the prices shown above, you will obtain a close but an incorrect answer.)

• -10.98%

• 5.57%

• - 3.66%

• 4.58%

The sample standard deviation of the annual one-year HPRs for RIM is:

• 9.55%

• 74.8%

• 36.6%

• 71.7%