) During the past years you owned two stocks and a stock index that had the following annual

returns . By this rates of return: Year Stock T Stock B Stock Index

1 0.19 0.08 0.07

2 0.08 0.03 0.11

3 -0.12 -0.09 -0.04

4 -0.03 0.02 0.12

5 0.15 0.04 -0.06

Required:

1. Compute the arithmetic mean annual rate of return for each stock. Which stock is most desirable by this measure? (2marks
2. Compute the standard deviation of the annual rate of return for each stock. By this measure, which is the preferable stock? (2marks)
3. Compute the coefficient of variation for each stock relative measure of risk, which stock is preferable? (2marks
4. Compute the geometric mean rate of return for each stock. Discuss the difference between the arithmetic mean rate return and the geometric mean return for each stock. Relate the differences in the mean returns to the standard deviation of the return for each stock (2marks)
5. Compute the coefficient between the stocks T and B. comment on your result. (2marks)