Question 2.

You've observed the following returns on Pine Computer's stock over the past five years:

17 percent, -4 percent, 20 percent, 12 percent, and 10 percent.

A. What was the arithmetic average return on the company's stock over this five-year period? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)

b-1. What was the variance of the company's returns over this period? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 16161.)

b-2. What was the standard deviation of the company's returns over this period? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

a. Average return	%
b-1. Variance
b-2. Standard deviation	%

Question 3.

A stock has had returns of 13 percent, 20 percent, 22 percent, -11 percent, 27 percent, and -5 percent over the last six years. What are the arithmetic and geometric average returns for the stock? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Arithmetic average return	%
Geometric average return	%

Question 4.

Consider the following information:

Rate of Return if State Occurs

State of Economy	Probability of State economy	Stock a	Stock b
Recession	.18	.07	-.18
Normal	.55	.10	.11
Boom	.27	.15	.28

• Calculate the expected return for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

• Calculate the standard deviation for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

a. Stock A expected return	%
a. Stock B expected return	%
B. Stock A standard deviation	%
B. Stock B standard deviation	%