Question

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

year	Stock x	Stock y
1	0.19	0.08
2	0.08	0.03
3	-0.12	-0.09
4	-0.03	0.02
5	005	0.04

a) Compute arithmetic mean annual rate of return for each stock. Which stock is most desirable by this measure? 

b) Compute the standard deviation of the annual rate of return for each stock. By this measure, which is the peferable stock? 

c) Compute the coefficient of variation for each stock By this relative measure of risk, which stock is preferable 

d) Compute the geometric mean rate of return I for each stock Discuss the difference between the arithmetic mean return and the geometric mean return for each stock. Relate the differences in the mean returns to the standard deviation of the return for each stock.

Answer 1