# Comparing Two Stocks: Arithmetic Mean & Annual Rate of Return

Not what you're looking for?

During the past five years, you owned two stocks that had the following annual rates of return:

Year Stock T Stock B

1 17.0% 7.0%

2 6.0% 2.0%

3 -10.0% -8.0%

4 -1.5% 1.5%

5 14.0% 5.0%

a. Compute the arithmetic mean annual rate of return for each stock. Which stock is most desirable by this measure?

b. Compute the standard deviation of the annual rate of return for each stock. By this measure, which is the preferable stock (lowest risk)?

c. Compute the coefficient of variation for each stock. By this relative measure of risk, which stock is preferable?

d. Compute the geometric mean rate of return for each stock.

Discuss the difference between the arithmetic mean return and the geometric mean return for each stock.

Discuss the differences in the mean returns relative to the standard deviation of the return for each stock.

##### Purchase this Solution

##### Solution Summary

The solution compares two stocks and determines the arithmetic mean and annual rate of return for each stock, as well as the coefficient of variation and geometric mean

###### Education

- B. Sc., University of Nigeria
- M. Sc., London South Bank University

###### Recent Feedback

- "Thank you."
- "thank you Chidi Ngene.. if you have any APA references would be great"
- "Thank you so much for your help, your explanations were easy to understand and apply!"
- "are you able to highlight the equations used either on the xlsx or a word doc as to how each graph was formed- overall looks fine i just need help understanding this myself"
- "Chidi Ngene, M. Sc. Was extremely helpful as without the help and guidance I would have failed, but with the help I passed. I still have a lot to learn and in need of the guidance to understand and learn more on the subject. I would recommend Chidi Ngene and BrainMass to anyone that are in need of help. Thank you!!"

##### Purchase this Solution

##### Free BrainMass Quizzes

##### Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

##### Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

##### Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

##### IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

##### Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce