(Answered) Consider the rate of return of stocks abc and

Finance

Consider the rate of return of stocks ABC and XYZ.

Year	rABC	rXYZ
1	20%	30%
2	12	12
3	14	18
4	3	0
5	1	10

a. Calculate the arithmetic average return on these stocks over the sample period.

b. Which stock has greater dispersion around the mean?

c. Calculate the geometric average returns of each stock. What do you conclude?

d. If you were equally likely to earn a return of 20%, 12%, 14%, 3%, or 1%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return? What if the five possible outcomes were those of stock XYZ?

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