Question 1

- Caswell Enterprises had the following end-of-year stock prices over the last five years and paid no dividends.TimeCaswell1$1229374658
- Calculate the average rate of return for each year from the above information.
- What is the arithmetic average rate of return earned by investing in Caswell’s stock over this period?
- What is the geometric average rate of return earned by investing in Caswell’s stock over this period?
- Considering the beginning and ending stock prices for the five-year period are the same, which type of average rate of return best describes the annual rate of return earned over the period (arithmetic or geometric)?
- The annual rate of return at the end of year 3 is what percent?

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