Question

Problem 1-05 

During the past five years, you owned two stocks that had the following annual rates of return: 

Year	Stock T	Stock B
1	0.19	0.06
2	0.09	0.06
3	-0.06	-0.07
4	-0.03	0.02
5	0.14	0.03

a. Compute the arithmetic mean annual rate of return for each stock. Round your answers to one decimal place. 

Stock T: _______ % Stock B: _______ % 

Which stock is most desirable by this measure? 

_______ , is more desirable because the arithmetic mean annual rate of return is _______ . 

b. Compute the standard deviation of the annual rate of return for each stock. (Use Chapter 1 Appendix if necessary.) Do not round intermediate calculations. Round your answers to three decimal places. 

Stock T: _______ % Stock B: _______ % 

By this measure, which is the preferable stock? 

_______  is the preferable stock. 

c. Compute the coefficient of variation for each stock. (Use the Chapter 1 Appendix if necessary.) Do not round intermediate calculations. Round your answers to four decimal places. 

Stock T: _______ % Stock B: _______ % 

By this relative measure of risk, which stock is preferable? 

_______ is the preferable stock. 

d. Compute the geometric mean rate of return for each stock. Round your answers to three decimal places. 

Stock T: _______ % Stock B: _______ % 

Answer 1

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