You have invested in the UK stock market. Details on the performance of the market are given below:

1. Calculate the average arithmetic returns, the variances, and the standard deviations for the UK. (30 marks)
2. Calculate the geometric return on the UK and compare it to the arithmetic return. Comment on and explain the differences between the UK arithmetic and geometric return. (20 marks)
3. What was the holding period return on UK equities over the period? (10 marks)
4. Suppose the returns on UK equities are normally distributed. Based on the data above, what is the approximate probability that your return on these will be less than –2 per cent in a given year? What range of returns would you expect to see 95 per cent of the time? What range would you expect to see 99 per cent of the time? (20 marks)
5. Review the difficulties in using historical data to measure expected returns on an investment.
(20 marks)

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Date Jan- 05 Jan- 06 Jan- 07 Jan- 08 Jan- 09 Jan- 10 Jan-11 Jan- 12 UK 100 117.36 131.46 122.47 86.136 110.06 126.16 116.00