Question

You are given the returns for the following three stocks:

Year          Stock A                             Stock B                           Stock C

1	12%	13%	-21%
2	12%	20%	36%
3	12%	15%	32%
4	12%	3%	13%
5	12%	9%	0%

Calculate the arithmetic return, geometric return, and standard deviation for each stock. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

Answer 1

arithmetic mean is calculated using the formula : sum of returns/no. of returns

geometric mean = (((1+r1)*(1+r2)*(1+r3)*(1+r4)*(1+r5))^(1/n)))-1

where r1,r2,r3,r4,r5 are the returns for the stocks for period 1,2,3,4,5 respectively and n = no. of returns = 5

standard deviation = square root of variance

year stock A stock B stock C 0.12 0.12 0.12 0.12 0.12 0.13 0.2 0.15 0.03 0.09 0.21 0.36 0.32 0.13 0 2 4 4 stock A stock B stock C 9 arithmetic return 10 lgeometric return 11 variance 12 standard deviation 13 12.00%) 12.00%) 12.00% 12.00%) 11.85% 9.89% 0 0.0041 0.05525 23.51% 0.00%) 6.40%)

stock B 0.13 0.2 0.15 0.03 0.09 1 year stock A 0.12 0.12 0.12 0.12 0.12 7 stock A stock B 9 arithmetic returnSUM(B2:B6/SAS6 10 geometric return(1+82)*(1+83)(1+B4)(1+B5)(1+B6)A1/SAS6))-1 11 variance 12 standard deviation SQRT(B11) 13 14 15 :((( 1+C2)*(14C3) *(1+4)*(1+5)*( 14C6))л(1/SAS6))-1 SQRT(C11)

1 stockB 2 0.13 3 0.2 4 0.15 5 0.03 6 0.09 stock C 0.21 0.36 0.32 0.13 0 8 stock B 9SUM(C2:C6)/SA$6 10 ((1+C2) *(1+C3) (1+C4) (1+C5)*(1+C6))A(1/SA$6))-1 11-((C2-C9) 2)+((C3-C9) 2)+((C4-C9)A2)+((C5-C9)A2)+((C6-C9)A2))/(SA$6-SA$2) ((D2-D9)2)+((D3-D9)2)+((D4-D9)A2)+((D5-D9)A2)+((D6-D9)A2))/(SA$6-SAS2) 12 SQRT(C11 13 14 stock C -SUM(D2:D6)/SA$6 -(((1+D2) (1+D3)*(1+D4)(1+D5)*(1+D6)A(1/SAS6))-1 -SQRT(D11