Answered step by step
Verified Expert Solution
Question
1 Approved Answer
please help find the geometric average of return. (Solving a comprehensive problem) Use the end-of-year stock price data in the popup window, , to answer
please help find the geometric average of return.
(Solving a comprehensive problem) Use the end-of-year stock price data in the popup window,
, to answer the following questions for the Harris and Pinwheel companies.
- Compute the annual rates of return for each time period and for both firms.
- Calculate both the arithmetic and the geometric mean rates of retum for the entire three-year period using your annual rates of retum from part a. (Note: you may assume that neither firm pays any dividends.)
- Compute a three-year rate of return spanning the entire period (Le., using the ending price for period 1 and ending price for period 4).
- Since the rate of returm calculated in part c is a three-year rate of retum, convert it to an annual rate of return by using the following equation:
o. How is the annual rate of return calculated in part d related to the geometric rate of return? When you are evaluating the performance of an investment that has been held for several years, what type of average rate of return (arthmetic or geometric) should you use? Why?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started