Question: Problem 2 (10 marks). In the past four years, the annual returns of one company's stock are 12%, 18%, and -14%, and 7%. a) What

Problem 2 (10 marks). In the past four years, the annual

Problem 2 (10 marks). In the past four years, the annual returns of one company's stock are 12%, 18%, and -14%, and 7%. a) What is the geometric average return? [3 marks] b) What is the arithmetic average of the returns? [3 marks] c) According to an economist' forecast on the Year 2020, the probabilities of repeating the performances of the former four years are 30%, 30%, 20%, and 20%, respectively. What is the expected return of the stock in the Year 2020? (4 marks]

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