to answer the (Solving a comprehensive problem) Use the end-of-year stock price data in the popup window, 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 three-year period using your annual rates of return from part a. (Note: you may assume that neither firm pays any dividends.) c. Compute a three-year rate of return spanning the erlere period (ie, using the ending price for period 1 and ending price for period 4). d. Since the rate of retum calculated in parte is a three-year rate of return, convert it to an annual rate of return by using the following equation: Three-Year Annual Rate = 1 + Rate of Return of Return J-C a. Enter the annual rate of return for each year for Harris in the table below. (Round to two decimal places.) Time Annual Rate of Return Annual Rate of Return 1 2 Value of Harris Stock $10 8 Value of Pinwheel Stock $20 32 28 % 3 12 % % 4 15 27 9 ni Enter the annual rate of return for each year for Pinwheel in the table below. (Round to two decimal places.) Time Value of Harris Stock Annual Rate of Return Value of Pinwheel Stock Annual Rate of Return ? Click to select your answer(s). tv ) 0 delet 7 8 9 C dy assume that neither form pays any dividends.) c. Compute a three-year rate of return spanning the entire period (i .. using the ending price for period 1 and ending price for period 4). d. Since the rate of retum calculated in parte is a three-year rate of return, convert it to an annual rate of return by using the following equation: mance Three-Year Annual Rate 1 + 1 + Rate of Return of Return Enter the annual rate of return for each year for Pinwheel in the table below. (Round to two decimal places.) Value of Annual Rate Value of Timo Annual Rate dation Harris Stock of Return Pinwheel Stock of Return 1 $10 $20 2 8 - 20.00% 32 % 3 12 50.00% 28 % 15 25.00% 27 % negg ght b. The arithmetic average rate of return eamed investing in Harris stock over this period is % (Round to two decimal places) The arithmetic, VARADA rate of ratum eamed hv innstina in Pinwheel stock cover the narind is. Round in two Click to select your answer(s). 4 2 tv A & * 00 ) 0 IT delete 7 9 } 1 O { [ P ] 11 J K L for period 4). d. Since the rate of retum calculated in part c is a three-year rate of return, convert it to an annual rate of return by using the following equation: 3 Annual Rate 1 + Three-Year Rate of Return JHL = 1 + of Return b. The arithmetic average rate of retum earned by investing in Harris stock over this period is % (Round to two decimal places.) The arithmetic average rate of return earned by investing in Pinwheel stock over this period is % (Round to two decimal places.) The geometric average rate of return earned by investing in Harris stock over this period is % (Round to two decimal places.) The geometric average rate of return earned by investing in Pinwheel stock over this period is % (Round to two decimal places.) c. The three-year rate of retum spanning the entire period for Harris is % (Round to two decimal places.) Click to select your answer(s). 9 ni & ( ) 0 * 00 Il + dele 8 7 9 0 { [ I P } ] K L penog using your annual rates of return from part a. (Note: you may assume that neither firm pays any dividends.) c. Compute a three-year rate of return spanning the entire period (ie., using the ending price for period 1 and ending price for period 4) d. Since the rate of return calculated in partc is a three-year rate of return, convert it to an annual rate of return by using the following equation: exti Three-Year 1.).( 1 + Annual Rate of Return Rate of Return ance otion c. The three-year rate of return spanning the entire period for Harris is %. (Round to two decimal places.) The three-year rate of retum spanning the entire period for Pinwheel is % (Round to two decimal places.) d. The annual rate of retum converted from the three-year rate in parte for Harris is % (Round to two decimal places.) The annual rate of return converted from the three-year rate in part e for Pinwheel is % (Round to two decimal places.) e. How is the annual rate of return calculated in part d related to the geometric rate of return? (Select the best choice theggbelow.) ghtni O A. The annual rate of retum calculated in part d is not related to the geometric average rate of return. O B. The annual rate of return calculated in part d is the same as the geometric rate of return in this problem but this is Click to select your answer(s). tv A ( 9 ) 0 delete 7 8 } 1 O { [ P 1 J K L puto a three-year rate of return spanning the entire period (ie, using the ending price for period 1 and ending price for period 4) d. Since the rate of return calculated in partc is a three-year rate of return, convert it to an annual rate of return by using the following equation: Three-Year -- 1+ Annual Rate of Return Rate of Return OC. The annual rate of return calculated in part d is nothing but the geometric average rate of return calculated in a different way. D. The annual rate of return calculated in part d is nothing but the arithmetic average rate of retum calculated in a different way. 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? (Select the best choice below.) 9 n O A. The arithmetic rate of return should be used. It better describes the average annual rate of return over a period because it compounds at the same rate while the geometric rate of retum is best used for a single period. OB. The geometric rate of return should be used. It better describes the average annual rate of return over a period because it compounds at the same rate while the arithmetic rate of return is best used for a single period. ? Click to select your answer(s). MacBook Pio ( + ) delete & 7 8 9 0 { [ } 1 0 U K L retum ? for the entire three-year period using your annual rates of return from part a. (Note: you may assume that neither firm pays any dividends) c. Compute a three-year rate of return spanning the entire period (.e., using the ending price for period 1 and ending price for period 4). d. Since the rate of return calculated in parte is a three-year rate of retum, convert it to an annual rate of return by using the following equation: Three-Year 1 + Annual Rate of Return 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? (Select the best choice below) o A. The arithmetic rate of retum should be used. It better describes the average annual rate of return over a period because it compounds at the same rate while the geometric rate of return is best used for a single period. OB. The geometric rate of return should be used. It better describes the average annual rate of return over a period because it compounds at the same rate while the arithmetic rate of return is best used for a single period. O c. Arithmetic average return better describes the average annual rate of return over a period because it is a simple average, so it answers the question concerning the expected rate of return over a period. OD. Geometric average return better describes the average annual rate of return over a period because it is a simple average, so it answer the question concerning the expected rate of return over a period. 39 ni Click to select your answer(). tv MacBook Pro ) 0 N + & 7 delete 8 9 } O P. { [ I 1 retu K L ? Time Remaining:01:38:34 Submit Test This Question: 1 pt 19 of 19 (14 complete) This Test: 19 pts possible (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. 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 three-year period using your annual rates of return from part a. (Note: you may assume that neither firm pays any dividends.) c. Compute a three-year rate of return spanning the entire period (1.0., using the ending price for period 1 and ending price for period 4). d. Since there um by using the following e Data Table When you are of return (arith Time 1 2 3 4 Harris $10 8 Pinwheel $20 32 28 27 Maverage rate 12 15 O A The art becaud Ir a period riod 9 OB. The go Print Done Ir a period CHIA Iriod. OC. Arithmetic average return better describes the average annual rate of return over a period because it is a simple average, so it answers the question concerning the expected rate of return over a period D. Geometric average return better describes the average annual rate of return over a period because it is a simple average, so it answers the question concerning the expected rate of return over a period. Click to select your answer(s). dtv A * - delete 8 9 0 to answer the (Solving a comprehensive problem) Use the end-of-year stock price data in the popup window, 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 three-year period using your annual rates of return from part a. (Note: you may assume that neither firm pays any dividends.) c. Compute a three-year rate of return spanning the erlere period (ie, using the ending price for period 1 and ending price for period 4). d. Since the rate of retum calculated in parte is a three-year rate of return, convert it to an annual rate of return by using the following equation: Three-Year Annual Rate = 1 + Rate of Return of Return J-C a. Enter the annual rate of return for each year for Harris in the table below. (Round to two decimal places.) Time Annual Rate of Return Annual Rate of Return 1 2 Value of Harris Stock $10 8 Value of Pinwheel Stock $20 32 28 % 3 12 % % 4 15 27 9 ni Enter the annual rate of return for each year for Pinwheel in the table below. (Round to two decimal places.) Time Value of Harris Stock Annual Rate of Return Value of Pinwheel Stock Annual Rate of Return ? Click to select your answer(s). tv ) 0 delet 7 8 9 C dy assume that neither form pays any dividends.) c. Compute a three-year rate of return spanning the entire period (i .. using the ending price for period 1 and ending price for period 4). d. Since the rate of retum calculated in parte is a three-year rate of return, convert it to an annual rate of return by using the following equation: mance Three-Year Annual Rate 1 + 1 + Rate of Return of Return Enter the annual rate of return for each year for Pinwheel in the table below. (Round to two decimal places.) Value of Annual Rate Value of Timo Annual Rate dation Harris Stock of Return Pinwheel Stock of Return 1 $10 $20 2 8 - 20.00% 32 % 3 12 50.00% 28 % 15 25.00% 27 % negg ght b. The arithmetic average rate of return eamed investing in Harris stock over this period is % (Round to two decimal places) The arithmetic, VARADA rate of ratum eamed hv innstina in Pinwheel stock cover the narind is. Round in two Click to select your answer(s). 4 2 tv A & * 00 ) 0 IT delete 7 9 } 1 O { [ P ] 11 J K L for period 4). d. Since the rate of retum calculated in part c is a three-year rate of return, convert it to an annual rate of return by using the following equation: 3 Annual Rate 1 + Three-Year Rate of Return JHL = 1 + of Return b. The arithmetic average rate of retum earned by investing in Harris stock over this period is % (Round to two decimal places.) The arithmetic average rate of return earned by investing in Pinwheel stock over this period is % (Round to two decimal places.) The geometric average rate of return earned by investing in Harris stock over this period is % (Round to two decimal places.) The geometric average rate of return earned by investing in Pinwheel stock over this period is % (Round to two decimal places.) c. The three-year rate of retum spanning the entire period for Harris is % (Round to two decimal places.) Click to select your answer(s). 9 ni & ( ) 0 * 00 Il + dele 8 7 9 0 { [ I P } ] K L penog using your annual rates of return from part a. (Note: you may assume that neither firm pays any dividends.) c. Compute a three-year rate of return spanning the entire period (ie., using the ending price for period 1 and ending price for period 4) d. Since the rate of return calculated in partc is a three-year rate of return, convert it to an annual rate of return by using the following equation: exti Three-Year 1.).( 1 + Annual Rate of Return Rate of Return ance otion c. The three-year rate of return spanning the entire period for Harris is %. (Round to two decimal places.) The three-year rate of retum spanning the entire period for Pinwheel is % (Round to two decimal places.) d. The annual rate of retum converted from the three-year rate in parte for Harris is % (Round to two decimal places.) The annual rate of return converted from the three-year rate in part e for Pinwheel is % (Round to two decimal places.) e. How is the annual rate of return calculated in part d related to the geometric rate of return? (Select the best choice theggbelow.) ghtni O A. The annual rate of retum calculated in part d is not related to the geometric average rate of return. O B. The annual rate of return calculated in part d is the same as the geometric rate of return in this problem but this is Click to select your answer(s). tv A ( 9 ) 0 delete 7 8 } 1 O { [ P 1 J K L puto a three-year rate of return spanning the entire period (ie, using the ending price for period 1 and ending price for period 4) d. Since the rate of return calculated in partc is a three-year rate of return, convert it to an annual rate of return by using the following equation: Three-Year -- 1+ Annual Rate of Return Rate of Return OC. The annual rate of return calculated in part d is nothing but the geometric average rate of return calculated in a different way. D. The annual rate of return calculated in part d is nothing but the arithmetic average rate of retum calculated in a different way. 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? (Select the best choice below.) 9 n O A. The arithmetic rate of return should be used. It better describes the average annual rate of return over a period because it compounds at the same rate while the geometric rate of retum is best used for a single period. OB. The geometric rate of return should be used. It better describes the average annual rate of return over a period because it compounds at the same rate while the arithmetic rate of return is best used for a single period. ? Click to select your answer(s). MacBook Pio ( + ) delete & 7 8 9 0 { [ } 1 0 U K L retum ? for the entire three-year period using your annual rates of return from part a. (Note: you may assume that neither firm pays any dividends) c. Compute a three-year rate of return spanning the entire period (.e., using the ending price for period 1 and ending price for period 4). d. Since the rate of return calculated in parte is a three-year rate of retum, convert it to an annual rate of return by using the following equation: Three-Year 1 + Annual Rate of Return 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? (Select the best choice below) o A. The arithmetic rate of retum should be used. It better describes the average annual rate of return over a period because it compounds at the same rate while the geometric rate of return is best used for a single period. OB. The geometric rate of return should be used. It better describes the average annual rate of return over a period because it compounds at the same rate while the arithmetic rate of return is best used for a single period. O c. Arithmetic average return better describes the average annual rate of return over a period because it is a simple average, so it answers the question concerning the expected rate of return over a period. OD. Geometric average return better describes the average annual rate of return over a period because it is a simple average, so it answer the question concerning the expected rate of return over a period. 39 ni Click to select your answer(). tv MacBook Pro ) 0 N + & 7 delete 8 9 } O P. { [ I 1 retu K L ? Time Remaining:01:38:34 Submit Test This Question: 1 pt 19 of 19 (14 complete) This Test: 19 pts possible (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. 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 three-year period using your annual rates of return from part a. (Note: you may assume that neither firm pays any dividends.) c. Compute a three-year rate of return spanning the entire period (1.0., using the ending price for period 1 and ending price for period 4). d. Since there um by using the following e Data Table When you are of return (arith Time 1 2 3 4 Harris $10 8 Pinwheel $20 32 28 27 Maverage rate 12 15 O A The art becaud Ir a period riod 9 OB. The go Print Done Ir a period CHIA Iriod. OC. Arithmetic average return better describes the average annual rate of return over a period because it is a simple average, so it answers the question concerning the expected rate of return over a period D. Geometric average return better describes the average annual rate of return over a period because it is a simple average, so it answers the question concerning the expected rate of return over a period. Click to select your answer(s). dtv A * - delete 8 9 0
