1. A stock has had returns of 29 percent, 14 percent, 23 percent, –8 percent, 9 percent, and –14 percent over the last six years. What are the arithmetic (AAR) and geometric (GAR) average returns for the stock?
B. AAR = 7.69%, GAR = 8.83%
A. AAR = 16.17%%, GAR = 15.52%
D. AAR = 8.83%, GAR = 7.69%
C. AAR = 8.83%, GAR = 8.83%
2. Consider the following information on three stocks A, B and C: State of Probability of Rate of Return Economy State Occurring A B C Boom .2 .20 .35 .60 Normal .6 .15 .12 .05 Bust .2 .01 -.25 -.50 If your portfolio is invested 30 percent each in A and B and 40 percent in C, what is the portfolio expected return? The variance? The standard deviation?
B. 4.30%, .08001, 28.29%
A. 9.16%, .08001, 28.29%
C. 9.16%, .03882, 19.70%
D. 8.72%, .04612, 21.48%