Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:10. The annual returns on the stock of a firm during the last five years are provided
below.
Year
Return
12345
0.08 (or 8%)
0.10 (or 10%)
0.15 (or 15%)
0.20 (or 20%)
-0.10 (or -10%)
a) Find the holding period return of the stock over the five-year period.
b) Compute the arithmetic average return of the stock over the five-year period.
c) Calculate the geometric average return of the stock over the five-year period.
d) Calculate the variance and standard deviation of the returns during this five-year
period. Use the arithmetic average return in (b) for your calculations in (d). Use at
least 5 decimal places for the variance computation to avoid rounding errors.
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