The following returns were realized on an investment over a 5-year period. Year 1 2 3...
The following returns were realized on an investment over a 5-year period.
|
Year |
1 |
2 |
3 |
4 |
5 |
|
Rate of Return |
0.10 |
0.22 |
0.06 |
-0.05 |
0.20 |
a) Compute the arithmetic mean, and median of the returns.
b) Compute the geometric mean. Round to 3 decimal places.
c) Which of the three statistics computed in parts (a) and (b) best describes the return over the 5-year periods?
Justify your answer with an explanation.
Homework Answers
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The following returns were realized on an investment over a 5-year period. Year 1 2 3...
An investment you made 5 years ago has realized the following rates of return. Calculate mean...
An investment you made 5 years ago has realized the following
rates of return.
Calculate mean and median of the rates of return using
appropriate statistical formulas and show your working.
Compute geometric mean using an appropriate statistical formula
and show your working.
Which one of the three statistics you computed in parts (a) and
(b) does best describe the investment return over the 5-year
period? Explain why.
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An investment you made 5 years ago has realized the following
rates of return.
Calculate mean and median of the rates of return using
appropriate statistical formulas and show your working.
Compute geometric mean using an appropriate statistical formula
and show your working.
Which one of the three statistics you computed in parts (a) and
(b) does best describe the investment return over the 5-year
period? Explain why.
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An investment pays the following annual rate of return over a four-year period. {4.12%,0.03%,2.79%,-11.47%} 1. The arithmetic mean return is 2. The geometric mean return is 3. The median return is NB: You may find the following definitions useful. a. The arithmetic mean of a sample of 4 observations is given by: ra = 1+2+3+4 4 b. The geometric mean of a sample of 4 annually compounded growth rates. 1 +rg = [(1 + r1)(1 + r2)(1 + r3)(1 +...
3. Measuring standalone risk using realized (historical) data Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Blue Llama Mining Inc. (BLM): Five years of realized returns for BLM are given in the following table. Remember: 1. While BLM was started 40 years ago, its common stock has...
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3. Measuring stand-alone risk using realized (historical) data Returns earned over a given time period are called realired returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Blue Llama Mining Inc. (BLM): Five years of realized returns for BLM are given in the following table. Remember: 1. While BLM was started 40 years ago, its common stock has...
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