1. Economics
2. Finance
3. Bonds
4. 449366

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a) Explain why the geometric and arithmetic mean returns are not equal and whether one or the other may be more useful for investment decision making.

b) For the time period indicated, rank these investments on a risk-adjusted basis from most to least desirable. Explain your rationale.

c) Assume the returns in these series are normally distributed.

1. Calculate the range of returns that an investor would have expected to achieve 95 percent of the time holding common stocks.

2. Suppose an investor holds real estate for this time period. Determine the probability of at least breaking even on this investment.

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• Chapter 3 econ-1.doc