You've observed the following returns on Crash-n-Burn Computer's stock over the pastfive years: 5 percent, -9 percent, 24 percent, 16 percent, and 16 percent.Requirement 1:What was the arithmetic average return on Crash-n-Burn's stock over this five yearperiod?(Click to select)Requirement 2:(a) What was the variance of Crash-n-Burn's returns over this period? (Do not roundIntermediate calculations.)(Click to select)(b)What was the standard deviation of Crash-n-Burn's returns over this period? (Do notround Intermediate calculations.)(Click to select)

Given:5%, -9%, 24%, 16%, 16% Requirement 1:Arithmetic average return also known as the mean, is…

Answered: You've observed the following returns…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 17P

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1) Consider two stocks A and B and their returns are assumed to be normally distributed. Over the past 10 years, both stocks have the same (arithmetic) average annual returns, but Stock A has a significantly higher volatility (measured by standard deviation of annual returns) than Stock B. Which of the following is TRUE? A) Stock A has a higher geometric average return than Stock B. B) Stock A has a lower geometric average return than Stock B. C) Stock A and B have the same geometric average return. D) There is no sufficient information to determine which stock has a higher or lower geometric average return. 2) PL Lumber stock is expected to return 22 percent in a booming economy, 15 percent in a normal economy, and lose 2 percent in a recession. The probabilities of an economic boom, normal state, or recession are 15 percent, 80 percent, and 5 percent, respectively. What is the expected rate of return on this stock? 12.80 percent 14.60 percent 15.20 percent 15.60 percent 3) You would…

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