# Question

During the past five years, you owned two stocks that had the following annual rates of return:

a. Compute the arithmetic mean annual rate of return for each stock. Which stock is most desirable by this measure?

b. Compute the standard deviation of the annual rate of return for each stock. By this measure, which is the preferable stock?

c. Compute the coefficient of variation for each stock. By this relative measure of risk, which stock is preferable?

d. 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.

Discuss the differences in the mean returns relative to the standard deviation of the return for eachstock.

a. Compute the arithmetic mean annual rate of return for each stock. Which stock is most desirable by this measure?

b. Compute the standard deviation of the annual rate of return for each stock. By this measure, which is the preferable stock?

c. Compute the coefficient of variation for each stock. By this relative measure of risk, which stock is preferable?

d. 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.

Discuss the differences in the mean returns relative to the standard deviation of the return for eachstock.

## Answer to relevant Questions

You are considering acquiring shares of common stock in the Madison Beer Corporation. Your rate of return expectations are as follows:MADISON BEER CORP. Possible Rate of Return Probability −0.10 ...Assume that the consensus required rate of return on common stocks is 14 percent. In addition, you read in Fortune that the expected rate of inflation is 5 percent and the estimated long-term real growth rate of the economy ...Why is a policy statement important?a. Someone in the 15 percent tax bracket can earn 10 percent on his investments in a tax-exempt IRA account. What will be the value of a $10,000 investment in 5 years? 10 years? 20 years?b. Suppose the preceding 10 percent ...You are a wealthy individual in a high tax bracket. Why might you consider investing in a municipal bond rather than a straight corporate bond, even though the promised yield on the municipal bond is lower?Post your question

0