Consider the rate of return of stocks ABC and XYZ. Year rABC rXYZ
1 22 6
2 10 10
3 19 17
4 3 0
5 1 -8
a. Calculate the arithmetic average return on these stocks over the sample period.
b. Which stock has greater dispersion around the mean?
c. Calculate the geometric average returns of each stock.
d-1. 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?
d-2. If you were equally likely to earn a return of 36%, 10%, 17%, 0%, or -8%, in each year (these are the five annual returns for stock XYZ), what would be your expected rate of return?

The management of a private investment club has a fund of $250,000 earmarked for investment in stocks. to arrive at an acceptable overall level of risk, the stocks that management is considering have been classified into three categories: high risk (x), medium risk (y), and low risk (z). management estimates that high risk stocks will have a rate of return of 15%/year; medium risk stocks, 10%/year; and low risk stocks, 6%/year. the amount of money invested in low risk stocks is to be twice the sum of the amount invested in stocks of the other two categories. if the investment goal is to have a rate of return of 9% on the total investment, determine how much the club should invest in each type of stock. (assume that all the money available for investment is invested.)

Shawn received an e-mail offering a great deal on music, movie, and game downloads. he has never heard of the company, and the e-mail address and company name do not match. what should shawn do?

The former chairman of the federal reserve, alan greenspan, used the term "irrational exuberance" in 1996 to describe the high levels of optimism among stock market investors at the time. stock market indexes such as the s& p composite price index were at an all-time high. some commentators believed that the fed should intervene to slow the expansion of the economy. why would central banks want to clamp down when the economy is growing? a. to block the formation of unsustainable speculative asset bubbles. b. to curtail excessive profits in the banking system. c. to prevent inflationary forces from gathering momentum. d. all of the above. e. a and c only.