You bought BFC stocks at the end of Year 1 and hold BFC stocks with the following prices at the end of Year 2, Year 3, and sold them at the end of Year 4:

Year

Stock BFC

1

$100

2

$110

3

$90

4

$80

Compute both arithmetic and geometric average returns on a per annum basisover the holding period. Which is the preferred method of measuring average return? Explain why. [6 Marks]