80.2K
Verified Solution
Link Copied!
1. You've recorded the following prices and dividend payments for a stock:
| Month | Stock price | Dividend |
| 1 | 161.38 | |
| 2 | 161.54 | 1.32 |
| 3 | 159.96 | |
| 4 | 164.61 | |
| 5 | 164.8 | 1.32 |
Part 1
What was the arithmetic average monthly return?
Part 2
What was the geometric average return per month?
Part 3
What was the total return over the entire period?
2. Which statements are correct? The geometric average return _____.
Check all that apply:
is better for forecasting returns over many periods
is usually less than the arithmetic mean
takes into account compounding
is the simple average of the individual returns
3. Bank of America quotes a rate of 11.7% with monthly compounding for a consumer loan, while Wells Fargo quotes you 12% with annual compounding.
a. What is the EAR for Bank of America?
b. What is the EAR for Wells Fargo?
c. As a borrower, which loan should you take?
The loan from Bank of America
The loan from Wells Fargo
Answer & Explanation
Solved by verified expert
