Need help with questions 15-17. Would appreciate it if you could show how you go

Question

Need help with questions 15-17. Would appreciate it if you could show how you got the answer

15. Consider an investment held over three years with a return of +20 percent in the first

year, -25 percent in the second year, and +20 percent in the third year. What is the arithmetic mean return on the investment?

16. Using the information provided in the previous question, what is the geometric mean return

on the investment?

17. Assume a portfolio is comprised of two securities, A and B, whose standard deviations are 0.0412 and 0.0721, respectively. If their covariance is 0.002, what is their coefficient of correlation?

Explanation / Answer

Answer:15 Arithmetic mean=(20%-25%+20%)/3=5%

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