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Problem 24-5 Consider the rate of return of stocks ABC and XYZ. Year 1 2 3 4 5 rABC 24% 10 17 4 1 rXYZ
Problem 24-5 Consider the rate of return of stocks ABC and XYZ. Year 1 2 3 4 5 rABC 24% 10 17 4 1 rXYZ 34% 12 18 1 -9 a. Calculate the arithmetic average return on these stocks over the sample period. Arithmetic Average ABC XYZ % % c. Calculate the geometric average returns of each stock. What do you conclude? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Geometric Average % ABC XYZ % d. If you were equally likely to earn a return of 24%, 10%, 17%, 4%, or 1%, 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.) Expected rate of return e. What if the five possible outcomes were those of stock XYZ? Expected rate of return
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