Microgen had the following returns over the last four years.

Year Annual return

2000 -10%

2001 15%

2002 -4%

2003 23%

a) What are the arithmetic and geometric average annual returns on this stock over this four year period?

b) What is the annual variance and standard deviation of returns of this stock over this four year period?

c) Suppose that there was a risk free asset over these four years that returned 2% annually. If you formed a portfolio with weights of 0.5 on Microgen and 0.5 on the risk free asset, what would be the annual return and standard deviation of returns of this new portfolio over the four years?