(Solving a comprehensive problem) Use the end-of-year stock price data in the popup window, ,to answer the following questions for the Hamris and Pinwheel companies. Compute the annual rates of return each time period and for both firms. entire three-year period using your annual rates of retum from part a. (Note: you may assume that neither firm pays any dividends.) Compute a three-year rate of return spanning the entire period (i.e., using the ending price for period 1 and ending price for period 4). Since the rate of return calculated in part c is a three-year rate of return, convert it to an annual rate of return using the following equation: Three-Year Annual Rate Rate of Return f Return How is the annual rate of return calculated in part d related t investment that has been held for several years, what type of average rate of return (arithmetic or the geometric rate of retun? When you are evaluating the performance of geometric) should you use? Why? Enter the annual rate of return for each year for Haris in the table below. (Round to two decimal places.) Annual R Value c Annua ate Time of Return Harris Stock Pinwheel Stock Return $10 17 2 33 % 15 31 4 16 26 Enter the annual rate of return for each year for Pinwheel in the table below. (Round to two decimal places.) Value of Annual Rate Value of Annual Rate Time Harris Stock of Return Pinwheel Stock of Return 1 $10 $17 2 8 20.00% 33 50.00% 3 12 31 % 16 33.33% 26 %. (Round to two decimal places.) b. The arithmetic average rate of return earned by investing in Harris stock over this period is %. (Round to two decimal places.) The arithmetic average rate of return earned by investing in Pinwheel stock over this period is The geometric average rate of return earned by investing in Harris stock over this period is %. (Round to two decimal places.) The geometric average rate of return earned by investing in Pinwheel stock over this period is%. (Round to 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 return converted from the three-year rate in part e for Harris is%. (Round to two decimal places.) % . (Round to two decimal places.) The annual rate of return converted from the three-year rate in part c for Pinwheel is retum? (Select the best choice below e. How is the annual rate f return calculated in part d related to the geometric rater O A. The annual rate of return calculated in part d is not related to the geometric average rate of return. O B. The annual rate of retun calculated in part d is nothing but the geometric average rate O C. The annual rate of retum calculated in part d f return calculated in a different way. the same as the geometric rate return in this problem but this is only a coincidence. O D. The annual rate of retun calculated in part d is nothing but the arithmetic average rate return calculated in a different way 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 return over a period because it is a simple average, so it answers the question conceming the expected rate of return over a period. O B. The arithmetic rate of return should be used. It better describes the average annual rate of return over a period because it compounds at the same rate while the geometric rate of return O C. The geometric rate of return should best used ra single period ra single period. 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 O D. Geometric average return better describes the average annual rate of retun over a period because it is a simple average, it answers the question concerning the expected rate of return over a period. Time Harris Pinwheel 1 $10 $17 2 33 3 12 31 4 16 26