Consider the rate of return of stocks ABC and XYZ Year 1 2 3 4...
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Consider the rate of return of stocks ABC and XYZ Year 1 2 3 4 5 ABC 22% 9 19 6 1 38% 11 19 a. Calculate the arithmetic average return on these stocks over the sample period. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Arithmetic Average ABC XYZ b. Which stock has greater dispersion around the mean return? ABC OXYZ C. Calculate the geometric average returns of each stock. What do you conclude? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Geometric Average ABC XYZ d. If you were equally likely to earn a return of 22%,9% 19%, 6%. Or 1%. In each year (these are the five annual returns for stock ABC). what would be your expected rate of return? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Expected rate of retum e. What If the five possible outcomes were those of stock XYZ? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Expected rate of retur f. Given your answers to (d) and (e), which measure of average return, arithmetic or geometric, appears more useful for predicting future performance? O Arithmetic
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