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( Solving a comprehensive problem ) Use the end - of - year stock price data in the popup window, , to answer the following
Solving a comprehensive problem Use the endofyear stock price data in the popup window, to answer the following questions for the Harris and Pinwheel companies.
a Compute the annual rates of return for each time period and for both firms.
b Calculate both the arithmetic and the geometric mean rates of return for the entire threeyear period using your annual rates of return from part aNote: you may assume that neither firm pays any dividends.
c Compute a threeyear rate of return spanning the entire period ie using the ending price for period and ending price for period
d Since the rate of return calculated in part is a threeyear rate of return, convert it to an annual rate of return by using the following equation:
ThreeYear Rate Return Annual Rate Return
e How is the annual rate of return calculated in part 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 arithmetic or geometric should you use? Why?
Data table
tableTimeHarris,Pinwheel$$
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