QUESTION THREE (b) During the past five years, you had investments in companies listed on the GSE. The annual rates of returns from the two stocks X and Y are shown in the table below. Compute questions (i-v) for 4marks each. (ii) (iii) (iv) (v) Year 112345 Return of X (% annual) 19 8 -12 -3 15 Return of Y (% annual) 8 3 -9 2 4 Compute the arithmetic mean annual rate of return for each stock. Which stock is most desirable by this measure? Explain Compute the standard deviation of the annual rate of return for each stock. By this measure which stock is preferable? Explain Compute the coefficient of variation for each stock. By this relative measure, which stock is preferable? Explain Compute the geometric mean rate of return for each stock. Discuss the difference between the arithmetic mean return and the geometric mean return for each stock.
QUESTION THREE (b) During the past five years, you had investments in companies listed on the GSE. The annual rates of returns from the two stocks X and Y are shown in the table below. Compute questions (i-v) for 4marks each. (ii) (iii) (iv) (v) Year 112345 Return of X (% annual) 19 8 -12 -3 15 Return of Y (% annual) 8 3 -9 2 4 Compute the arithmetic mean annual rate of return for each stock. Which stock is most desirable by this measure? Explain Compute the standard deviation of the annual rate of return for each stock. By this measure which stock is preferable? Explain Compute the coefficient of variation for each stock. By this relative measure, which stock is preferable? Explain Compute the geometric mean rate of return for each stock. Discuss the difference between the arithmetic mean return and the geometric mean return for each stock.
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
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:QUESTION THREE
(b) During the past five years, you had investments in companies listed on the GSE. The annual
rates of returns from the two stocks X and Y are shown in the table below. Compute
questions (i-v) for 4marks each.
(ii)
(iii)
(iv)
(v)
Year
112345
Return of X (% annual)
19
8
-12
-3
15
Return of Y (% annual)
8
3
-9
2
4
Compute the arithmetic mean annual rate of return for each stock. Which stock is
most desirable by this measure? Explain
Compute the standard deviation of the annual rate of return for each stock. By this
measure which stock is preferable? Explain
Compute the coefficient of variation for each stock. By this relative measure, which
stock is preferable? Explain
Compute the geometric mean rate of return for each stock.
Discuss the difference between the arithmetic mean return and the geometric mean
return for each stock.
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