(a)
Estimate the year of return.
(a)
Explanation of Solution
Table-1 shows the price for a 6 year as follows:
Table-1 | |
Year | Price |
1 | 10 |
2 | 14 |
3 | 15 |
4 | 22 |
5 | 30 |
6 | 25 |
The year of return for 6 years can be calculated using Table-1:
Year 1
Thus, year 1 rate of return is -0.167.
Year 2 rate of return can be calculated as follows:
Thus, year 2 rate of return is 0.4
Year 3 rate of return can be calculated as follows:
Thus, year 3 rate of return is 0.071.
Year 4 rate of return can be calculated as follows:
Thus, year 4 rate of return is 0.467.
Year 5 rate of return can be calculated as follows:
Thus, year 5 rate of return is 0.364.
Year 6 rate of return can be calculated as follows:
Thus, year 6 rate of return is -0.167.
(b)
Determine the mean and median.
(b)
Explanation of Solution
Table–2 shows the investment over a 6-year period as follows:
Table-2 | |
Year | Rate of return |
1 | -0.167 |
2 | 0.4 |
3 | 0.071 |
4 | 0.467 |
5 | 0.364 |
6 | -0.167 |
The mean can be obtained by summing all observations and dividing the number of observations. The mean can be calculated as follows:
Thus, the value of mean is 0.161.
Median:
Table-3 shows the sample in the ascending order as follows:
Table-3 | |
Year | Rate of return |
1 | -0.167 |
2 | -0.167 |
3 | 0.071 |
4 | 0.364 |
5 | 0.4 |
6 | 0.467 |
The median can be calculated by arranging all the observations in order of ascending or descending and the observation that falls in the middle is the median.
Thus, the value of median is 0.218.
(c)
Determine the geometric mean.
(c)
Explanation of Solution
The geometric mean can be calculated as follows:
Thus, the value of geometric mean is 0.13.
(d)
Describe the return over a 4-year period.
(d)
Explanation of Solution
From the above calculation, the geometric mean is best over the 6-year period because
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Chapter 4 Solutions
Statistics for Management and Economics (Book Only)
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