Finance
Average Return, Variance Questions and Standard Deviation of Returns, Risk Premium 7 Over the past five years, a stock provided annual returns of 12.6 percent, 5.8 percent, 7.9 percent, -11.2 percent and -2.4 percent. What is the arithmetic average return? What is the geometric average return? What is the variance of these returns? What is the standard deviation of these returns? 7 Refer to Problem 1. If the risk-free rate is 2%, what is the risk premium on the stock? Note: use the arithmetic average return in your computation. a A company had returns of 5%, 10%, -15%, 20%, -12%, 22%, 8% in the last few years. Compute the arithmetic average return, geometric average return, variance, and standard deviation of returns. a. Refer to Problem 3. If the risk-free rate is 2%, what is the risk premium on the stock? Note: use the arithmetic average return in your computation.