Suppose You Own Two Stocks,A and B The Risk-Free Return During the Sample Period Was 3

question 36

Multiple Choice

Suppose you own two stocks,A and B.In year 1,stock A earns a 2% return and stock B earns a 9% return.In year 2,stock A earns an 18% return and stock B earns an 11% return.Which stock has the higher geometric average return?

• A)Stock A
• B)Stock B
• C)The two stocks have the same geometric average return
• D)At least three periods are needed to calculate the geometric average return
• E)None of the above
• The following data are available relating to the performance of Sooner Stock Fund and the market portfolio: \[\begin{array} { | l | l | l | }
• \hline & \text { Sooner } & \text { Market Portfolio } \\
• \hline \text { Average Return } & 20 \% & 11 \% \\
• \hline \text { Standard Deviation of Returns } & 44 ^ { \circ } \% & 19 \% \\
• \hline \text { Beta } & 1.8 & 1.0 \\
• \hline \text { Residual standard deviation } & 2.0 \% & 0.0 \% \\
• \hline
• \end{array}\] The risk-free return during the sample period was 3%.