Consider the rate of return of stocks ABC and XYZ. Year 1...
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Accounting
Consider the rate of return of stocks ABC and XYZ.
Year 1 2 3 4 5 rABC 22% 10 19 3 1 rxyz 36% 10 17 -8 b. Which stock has greater dispersion around the mean return? O XYZ ABC c. Calculate the geometric average returns of each stock. What do you conclude? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Geometric Average ABC % XYZ % d. If you were equally likely to earn a return of 22%, 10%, 19%, 3%, or 1%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Expected rate of return % e. What if the five possible outcomes were those of stock XYZ? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Expected rate of return % f. Given your answers to (d) and (e), which measure of average return, arithmetic or geometric, appears more useful for predicting future performance? Arithmetic Geometric
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