a. select:

b. select:

The following information is available concerning the historical risk and return relationships in the U.S. capital markets: U.S. CAPITAL MARKETS TOTAL ANNUAL RETURNS, 1990-2015 Arithmetic Geometric Standard Deviation Investment Category Mean Mean of Return Common stocks 10.56% 9.34% 19.3% Treasury bills 3.90 3.83 3.1 Long-term government bonds 4.95 4.70 6.4 Long-term corporate bonds 5.70 5.34 9.0 Real estate 10.48 10.44 3.7 aBased on arithmetic mean. a. Explain why the geometric and arithmetic mean returns are not equal and whether one or the other may be more useful for investment decision making. The arithmetic average assumes -Select- , while the geometric average assumes -Select- b. For the time period indicated, rank these investments on a relative basis using the coefficient of variation from most to least desirable. Do not round intermediate calculations. Round your answers to two decimal places. Rank Investment Category Coefficient of variation, % 1 -Select- -Select- 2 3 -Select- 4 -Select- 5 -Select- c. Assume the arithmetic mean returns in these series are normally distributed. Calculate the range of returns that an investor would have expected to achieve 95 percent of the time from holding real estate. Do not round intermediate calculations. Round your answers to two decimal places. Use a minus sign to enter negative values, if any. Arithmetic: from % to % a. Explain why the geometric and arithmetic mean returns are not equal and whether one or the other may be more useful for investment decision making. 1 The arithmetic average assumes -Select- while the geometric average assume V -Select- compounding or interest-on-interest b. For the time period indicated, rank these investments on a relative basis using the coefficient of variation the presence of simple interest calculations. Round your answers to two decimal places. round intermediate Rank Coefficient of variation, % 1 2 Investment Category -Select- Common Stocks Long-term corporate bonds Long-term government bonds Real estate Treasury bills 3 4 5 JLTCUT