assignment on investment returns and risk premiums

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  • Explain the differences between the arithmetic return and the geometric return. Include in your explanation what factor determines the difference between arithmetic returns and geometric (compounded) returns. (75–150 words, or 1–2 paragraphs)
  • If you own a stock with volatile returns over a 2-year period, will the average return be higher or lower than the geometric return? Explain why. (75–150 words, or 1–2 paragraphs)
  • Why is it more convenient to display your investment returns in percentage terms rather than dollar terms? (75–150 words, or 1–2 paragraphs)
  • Would a common stock or a corporate bond demand a higher risk premium? Explain why. (75–150 words, or 1–2 paragraphs)
  • What are the differences between a bond risk premium and an equity risk premium? (75–150 words, or 1–2 paragraphs)
  • Explain whether it is possible to earn excess returns without taking on additional risk. (75–150 words, or 1–2 paragraphs)

Note: For each prompt, be sure to reference at least one scholarly source to support your answer. Use the Walden Undergraduate Paper Template, provided in this week’s Learning Resources, to complete this Assignment.

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