(Solving a comprehensive problem) Use the end-of-year stock price data in the popup window. B. to answer the following questions for the Harris and Pinwheel companies. a. Compute the annual rates of relum for each time period and for both firms. b. Calculate both the arithmetic and the geometric mean rates of return for the entire three-year period using your annual rates of return from part a. (Note: you may assume that neither firm pays any dividends.) c. Compute a three year rate of retum spanning the entire period (.e., using the ending price for period 1 and ending price for period 4). d. Since the rate of return calculated in partc is a three-year rate of return, convert it to an annual rate of return by using the following equation: 1 + Three-Year Rate of Retum = 1 + Annual Rate of Return e. How is the annual rate of return calculated in part d related to the geometric rate of return? When you are evaluating the performance of an investment that has been held for several years, what type of average rate of return (arithmetic or geometric) should you use? Why? a. Enter the annual rate of return for each year for Harris in the table below. (Round to two decimal places.) Time Annual Rate of Return Annual Rate of Return Value of Harris Stock S11 9 Value of Pinwheel Stock $18 33 1 2 10 % 29 3 3 4 15 % 24 Enter the annual rate of return for each year for Pinwheel in the table below. (Round to two decimal places.) Value of Time Annual Rate of Return Annual Rate of Return Value of Pinwheel Stock $18 33 Harris Stock S11 9 1 2 - 18.18% 3 10 29 % 11.11% 50.00% 15 24 (Solving a comprehensive problem) Use the end-of-year stock price data in the popup window, B. to answer the following questions for the Harris and Pinwheel companies. a. Compute the annual rates of return for each time period and for both firms. b. Calculate both the arithmetic and the geometric mean rates of return for the entire three-year period using your annual rates of return from part a. (Note: you may assume that neither firm pays any dividends.) c. Compute a three-year rate of return spanning the entire period (i.c., using the ending price for period 1 and ending price for period 4). d. Since the rate of return calculated in partc is a three-year rate of return, convert it to an annual rate of return by using the following equation: 1 + Three-Year Rate of Return 1 + Annual Rate of Return e. How is the annual rate of return calculated in part d related to the geometric rate of return? When you are evaluating the performance of an investment that has been held for several years, what type of average rate of retum (arithmetic or geometric) should you use? Why? b. The arithmetic average rate of return earned by investing in Harris stock over this period is %. (Round to two decimal places.) The arithirretic average rate of return earned by investing in Piriwheel stock over this period is_%. (Round to two decimal places.) The geometric average rate of retum eamed by investing in Harris slock over this period is % (Round to two decimal places.) The geometric average rate of retum eamed by investing in Pinwheel stock over this period is %. (Roundt two decimal places.) c. The three-year rate of return spanning the entire period for Harris is%. (Round to two decimal places.) The three-year rate of return spanning the entire period for Pinwheel is%. (Round to two decimal places.) d. The annual rate of retum converted from the three-year rate in partc for Harris is %. (Round to two decimal places.) The annual rate of return converted from the three-year rate in partc for Pinwheel is %. (Round to two decimal places.) e. How is the annual rate of return calculated in part d related to the geometric rate of return? (Select the best choice below.) (Solving a comprehensive problem) Use the end-of-year stock price data in the popup window, B. to answer the following questions for the Harris and Pinwheel companies. a. Compute the annual rates of return for each time period and for both firms. b. Calculate both the arithmetic and the geometric mean rates of return for the entire three-year period using your annual rates of retum from part a. (Note: you may assume that neither firm pays any dividends.) d. Since the rate of . Compute a three-year rate of return spanning the entire period (1,8., using the ending price for period 1 and ending price for period 4). te of return calculated in partc is a three-year rate of return, convert it to an annual rate of return by using the following equation: Three-Year Annual Rate Rate of Return of Relum average rate of return (arithmetic or s. How is the annual rate of return calculated in part d related to the geometric rate of return? When you are evaluating the performance of an investment that has been held for several years, what type geometric) should you use? Why? The annual rate of return converted from the three-year rate in parte for Pinwheel is % (Round to two decimal places.) e. How is the annual rate of return calculated in part d related to the geometric rate of return? (Select the best choice below.) O A. The annual rate of retum calculated in part d is the same as the geometric rate of return in this problem but this is only a coincidence. OB. The annual rate of returi calculated in part d is nothing but the geometric average rate of return calculated in a different way. OC. The annual rate of retum calculated in part d is nothing but the arithmetic average rate of retum calculated in a different way. OD. The annual rate of retum calculated in part d is not related to the geometric average rate of retum. When you are evaluating the performance of an investment that has been held for several years, what type of average rate of return (arithmetic or geometric) should you use? Why? (Select the best choice below.) O A. Arithmetic average retum better describes the average annual rate of retum over a period because it is a simple average, so it answers the question concerning the expected rate of retum over a period. OB. The geometric rate of retum should be used. It better describes the average annual rate of return over a period because it compounds at the same rate while the arithmetic rate of return is best used for a single period. OC. The arithmetic rate of return should be used. It better describes the average annual rate of retum over a period because it compounds at the same rate while the geometric rate of return is best used for a single period. OD. Geometric average return better describes the average annual rate of return over a period because it is a simple average, so it answers the question concering the expected rate of return over a period