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

Year rABC rXYZ

$120\%32\%$

$21212$

$31919$

$441$

$527$

Required:

a$.$ Calculate the arithmetic average return on these stocks over the sample period. $($Do not round intermediate calculations. Round your answers to $2$ decimal places.$)$

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

multiple choice $1$

ABC

XYZ

c$.$ Calculate the geometric average returns of each stock. $($Do not round intermediate calculations. Round your answers to $2$ decimal places.$)$

d$.$ If you were equally likely to earn a return of $20\%,12\%,19\%,4\%,$ or $2\%,$ in each year $($these are the five annual returns for stock ABC$),$ what would be your expected rate of return? $($Do not round intermediate calculations. Round your answers to $2$ decimal places.$)$

e$.$ What if the five possible outcomes were those of stock XYZ$?($Do not round intermediate calculations. Round your answers to $2$ decimal places.$)$

f$.$ Given your answers to $($d$)$ and $($e$),$ which measure of average return, arithmetic or geometric, appears more useful for predicting future performance?

multiple choice $2$

Arithmetic

Geometric