General Electric (GE) is one of the world's largest companies; it develops, manufactures, and markets a wide range of products, including medical diagnostic imaging devices, jet engines, lighting products, and chemicals. In 2011, the stock price rose 1.4%, and in 2012, the stock price rose 17.2%.

Source: Data extracted from finance.yahoo.com, June 24, 2012.

a. Compute the geometric mean rate of return per year for the two-year period 2011-2012. (Denote an increase of 1.4% as R2 = 0.014.)

b. If you purchased $1,000 of GE stock at the start of 2011, what was its value at the end of 2012?

c. Compare the result of (b) to that of Problem 3.20 (b).