Chapter 3, Problem 75SE

The Panama Railroad Company was established in 1850 to construct a railroad across the isthmus that would allow fast and easy access between the Atlantic and Pacific Oceans. The following table (The Big Ditch, Mauer and Yu, 2011) provides annual returns for Panama Railroad stock from 1853 through 1880.

Year	Return on Panama Railroad Company Stock (%)
1853	−1
1854	−9
1855	19
1856	2
1857	3
1858	36
1859	21
1860	16
1861	−5
1862	43
1863	44
1864	48
1865	7
1866	11
1867	23
1868	20
1869	−11
1870	−51
1871	−42
1872	39
1873	42
1874	12
1875	26
1876	9
1877	−6
1878	25
1879	31
1880	30

1. a. Create a graph of the annual returns on the stock. The New York Stock Exchange earned an annual average return of 8.4% from 1853 through 1880. Can you tell from the graph if the Panama Railroad Company stock outperformed the New York Stock Exchange?
2. b. Calculate the mean annual return on Panama Railroad Company stock from 1853 through 1880. Did the stock outperform the New York Stock Exchange over the same period?