Question

Question 7 1 pts ABCDE Corp. had the return of -10% in 2014, 15% in 2015, 23% in 2016, and 17% in 2017. What is the variance of ABCDE Corp.'s return during these years? 11.25% 1.59% 02.12% 14.57% Question 8 1 pts Which of the following is not true? One can calculate the stock's risk premium by dividing the firm's rate of return with the risk-free rate. Generally, the geometric average return has a different value from the arithmetic average return. None of the above all of the above are correct). The type of efficient market hypothesis that is most often used to forecast stock prices is called the semi-strong form of the efficient market hypothesis.

Answer 1

Answer 7

Average return= (-10+15+23+17)/4 = 11.25%

Deviations for 2014,2015,2016 and 2017 are 0.2125,0.0375, 0.1175 and 0.0575 respectively

Square of the same= 0.045, 0.0014, 0.014 and 0.003

Adding= 0.0634

Variance= 0.0634/4= 0.01585= 1.59% hence, second option.

Answer 8

None of the above is correct option.

It is true that risk premium can be calculated by dividing firm's return by risk free rate and that semi strong form of efficient market hypothesis is used for stock prices and it is also true that geometric average return can be different from arithmetic averge return.