Question
Suppose that you bought a stock 6 years ago at $12. The stock's price at the end of each year is shown here. Year 1
Suppose that you bought a stock 6 years ago at $12. The stock's price at the end of each year is shown here.
Year 1 2 3 4 5 6
Price 10 14 15 22 30 25
a. Compute the rate of return for each year (to 3 decimals).
Year 1 rate of return =
Year 2 rate of return =
Year 3 rate of return =
Year 4 rate of return =
Year 5 rate of return =
Year 6 rate of return =
b. Compute the mean and median of the rates of return (to 3 decimals).
Median =
c. Compute the geometric mean of the rates of return (to 3 decimals).
d. Explain why the best statistic to use to describe what happened to the price of the stock over the 6-year period is the geometric mean.
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