Arithmetic and Geometric Returns [LO1] A stock has had returns of 14 percent, 18 percent, 26 percent. -19 percent, 34 percent, and -9 percent over the last six years. What are the arithmetic and geometric returns for the stock?
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![Arithmetic and Geometric Returns [LO1] A stock has had returns of 14 percent,
18 percent, 26 percent. -19 percent, 34 percent, and -9 percent over the last six
years. What are the arithmetic and geometric retums for the stock?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F39eb2669-cfef-481c-993a-c83c3a7434b4%2F19eb1da4-d175-4a81-957c-393de706966d%2F1owxv5j_processed.jpeg&w=3840&q=75)
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- Arithmetic and Geometric Returns (LO1) A stock has had returns of 9%,21%,32%,-18%,27%, and -12% over the last six years. What are the arithmetic and geometric returns for the stock?5."A stock has yielded 15.3%, 10.8%, 5.2%, -3.4%, and 14% over the past five years, respectively. What is the geometric average return? " Please use excel to answerA stock has had returns of −19.2 percent, 29.2 percent, 26.4 percent, −10.3 percent, 35 percent, and 27.2 percent over the last six years. What are the geometric returns for the stock? & is there an excel function for it
- Consider the rate of return of stocks ABC and XYZ. Year rABC rXYZ 1 20 % 28 % 2 8 11 3 16 19 4 4 1 5 2 −9 a. Calculate the arithmetic average return on these stocks over the sample period. b. Which stock has greater dispersion around the mean return? A. ABC B. XYZ c. Calculate the geometric average returns of each stock. What do you conclude? (Do not round intermediate calculations. Round your answers to 2 decimal places.) d. If you were equally likely to earn a return of 20%, 8%, 16%, 4%, or 2%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return? (Do not round intermediate calculations.) e. What if the five possible outcomes were those of stock XYZ? f. Given your answers to (d) and (e), which measure of average return, arithmetic or geometric, appears more useful for predicting future performance? A. Arithmetic B. Geometricstandard deviation of the stock's returns? 01 20. Arithmetic and Geometric Returns A stock has had returns of –26 percent, 12 percent, 34 percent, -8 percent, 27 percent, and 23 percent over the last six years. What are the arithmetic and geometric average returns for the stock?. You have observed the following returns over time: Stock X Stock Y Year Price Div Price Div Market Returns 2005 20 0 11 0 0 2006 24 1.2 13 1.6 0.25 2007 26 0.5 17 0.5 0.18 2008 31 1 20 0.9 0.11 2009 33 1.5 23 1.2 0.12 2010 40 2 27 1.5 0.15 a. Calculate the annual returns for each stock (2006-2010) b. Calculate the average returns for each of the stocks and the market c. Calculate the covariance between the stocks d. Compute the portfolio return and portfolio risk if the Stock A and Stock B are combined equally in a portfolio.
- Now assume that the stock is currently selling at $30.29. What is its expected rate of return?Problem 2 . Suppose your expectations regarding the stock price are as follows: State of the Market Probability Ending Price Boom 0.35 Normal growth 0.30 Recession 0.35 $140 110 80 HPR (including dividends) 44.5% 14.0 -16.5 Use Equations 5.11 and 5.12 to compute the mean and standard deviation of the HPR on stocks.Consider the rate of return of stocks ABC and XYZ. Year rABC rXYZ 1 20 % 28 % 2 8 11 3 16 19 4 4 1 5 2 −9 (PLEASE SKIP THE FIRST THREE QUESTIONS) a. Calculate the arithmetic average return on these stocks over the sample period. b. Which stock has greater dispersion around the mean return? multiple choice A. ABC B. XYZ c. Calculate the geometric average returns of each stock. What do you conclude? (Do not round intermediate calculations. Round your answers to 2 decimal places.) d. If you were equally likely to earn a return of 20%, 8%, 16%, 4%, or 2%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return? (Do not round intermediate calculations.) e. What if the five possible outcomes were those of stock XYZ? f. Given your answers to (d) and (e), which measure of average return, arithmetic or geometric, appears more useful for predicting future…
- Q.Which of the following statements are true/false: I: The implied volatility of a stock can be calculated by deternining the standard deviation of stock returns over the last one year. II: The implied volatility of a stock can be calculated by deternining the standard deviation of stock returns over the last six months. A. I is true, II is false B. I is false, II is true C. I and II are both false D. I and II are both true5. Given the following expectations for the next year, what is the expected return, standard deviation, and beta of Stock A? Use the excel sheet we covered to find the answer. Returns Probability Stock A Market 0.10 0.05 0.02 0.25 0.09 0.08 0.30 0.13 0.12 0.25 0.19 0.15 0.10 0.21 0.16Problem: 1. Given six years of percentage return of Stock A and Stock B, identify the expected return, and risk of each instrument. Assume that each year, has equal chances of reoccurrence. Stock A Stock B 20X1 10 20 20X2 -15 -20 20X3 20 -10 20X4 25 30 20X5 -30 -20 20X6 20 60 a. Which of the two stocks is riskier? Why? b. Which of the stocks is expected to yield a higher return? Why? c. Where will you invest? Problem Solving: 1. Suppose you want to buy 10,000 shares of MegaWorld Corporation at a price of 4.00. You put up P10,000 and borrow the rest. What does your account balance sheet would look like? What is your margin? 2. Supposed that in the previous problem you shorted 10,000 shares instead of buying. The initial margin is 60 percent. What does the account balance sheet look like? 3. You deposited P100,000 cash in brokerage account and short sell P200,000 of stocks on margin.…
