In the past four years, the annual returns of one company’s stock are 12%, 18%, and –14%, and 7%. a) What is the geometric average return? b) What is the arithmetic average of the returns? c) According to an economist’ forecast on the Year 2020, the probabilities of repeating the performances of the former four years are 30%, 30%, 20%, and 20%, respectively. What is the expected return of the stock in the Year 2020

In the past four years, the annual returns of one company’s stock are 12%, 18%, and –14%, and 7%. a) What is the geometric average return? b) What is the arithmetic average of the returns? c) According to an economist’ forecast on the Year 2020, the probabilities of repeating the performances of the former four years are 30%, 30%, 20%, and 20%, respectively. What is the expected return of the stock in the Year 2020

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter17: Making Decisions With Uncertainty

Section: Chapter Questions

Problem 17.1IP

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