(a) Compute the arithmetic mean of the annual rate of return for each stock. Which stock is preferable by this measure? (b) Compute the geometric mean of the annual rate of return for each stock. Which stock is preferable by this measure? (c) Compute the standard deviation of the annual rate of return for each stock. Which stock is preferable by this measure?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Assume that the annual rates of return for two stocks (Reliance and Wipro) for the past 5 years are as given below:
Year
2
3
4
5
Reliance
35%
11%
-7%
-12%
24%
Wipro
28%
7%
-11%
15%
-5%
Based on the above information answer the following questions:
(a) Compute the arithmetic mean of the annual rate of return for each stock. Which stock is preferable by this measure?
(b) Compute the geometric mean of the annual rate of return for each stock. Which stock is preferable by this measure?
(c) Compute the standard deviation of the annual rate of return for each stock. Which stock is preferable by this measure?
Transcribed Image Text:Note: Please answer this question only by typing your answers in the typing space available for this question Assume that the annual rates of return for two stocks (Reliance and Wipro) for the past 5 years are as given below: Year 2 3 4 5 Reliance 35% 11% -7% -12% 24% Wipro 28% 7% -11% 15% -5% Based on the above information answer the following questions: (a) Compute the arithmetic mean of the annual rate of return for each stock. Which stock is preferable by this measure? (b) Compute the geometric mean of the annual rate of return for each stock. Which stock is preferable by this measure? (c) Compute the standard deviation of the annual rate of return for each stock. Which stock is preferable by this measure?
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