Suppose that the stock price has the following history of annual prices: P0 = $50, P1 = $50, P2 = $53, P3 = $49, P4 = $55, P5 = $65, P6 = $62, P7 = $70, P8 = $65. Its annual dividend payments are: D1 = $2, D2 = $3, D3 = $2, D4 = $5, D5 = $3, D6 = $5, D7 = $4, D8 = $6.

(a) For years 1 through 8, compute annual returns.

(b) Compute average arithmetic and geometric returns.

(c) Compute standard deviation of returns.

(d) Suppose that you want to forecast a 3-year average return. What will it be?