• Explain the differences between the arithmetic return and the geometric return. Include in your explanation what factor determines the difference between arithmetic returns and geometric (compounded) returns. (one paragraph)
• If you own a stock with volatile returns over a 2-year period, will the average return be higher or lower than the geometric return? Explain why. (two paragraphs)
• Why is it more convenient to display your investment returns in percentage terms rather than dollar terms? (one paragraph)
• Would a common stock or a corporate bond demand a higher risk premium? Explain why. (two paragraphs)
• What are the differences between a bond risk premium and an equity risk premium? (one paragraph)
• Explain whether it is possible to earn excess returns without taking on additional risk. (two paragraphs)
• Note: For each prompt, be sure to reference at least one scholarly source to support your answer.