Consider the rate of return of stocks ABC and $xYZ.$

a$.$ Calculate the arithmetic average return on these stocks over the sample period.

b$.$ Which stock has greater dispersion around the mean return?

c$.$ Calculate the geometric average returns of each stock. What do you conclude?

$d.$ If you were equally likely to earn a return of $20\%,12\%,14\%,3\%,$ or $1\%$ in each year

$($these are the five annual returns for stock ABC$),$ what would be your expected rate

of return?

e$.$ What if the five possible outcomes were those of stock XYZ$?$

$f.$ Given your answers to parts $(d)$ and $(e),$ which measure of average return, arithmetic

or geometric, appears more useful for predicting future performance? $($LO $18-1)($L$)$