Consider the rate of return of stocks ABC and XYZ. Year r ABC r XYZ 1 22 % 34 % 2 12 12 3 14 18 4 7 0 5 1 −8 1. If you were equally likely to earn a return of 22%, 12%, 14%, 7%, or 1%, in each year...

Consider the rate of return of stocks ABC and XYZ.

1.
If you were equally likely to earn a return of 22%, 12%, 14%, 7%, or 1%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return?(Do not round intermediate calculations.)

2.
What if the five possible outcomes were those of stock XYZ?

3. Given your answers to (d) and (e), which measure of average return, arithmetic or geometric, appears more useful for predicting future performance?

A. Arithmetic