Question

Problem 11-C Measuring Risk and Return Your investment advisor believes that recent stock returns should be given more consideration when calculating future returns and risk than older returns. The historical returns for Lately Lighthouse, Inc. are given in the table below, along with the weights that your advisor believes are appropriate. Use the corresponding weights in all calculations. Year 2012 2013 2014 2015 2016 Lately Stock 12.32% 13.70% 7.90% 11.14% 7.15% Weight 5% 15% 20% 25% 35% a. What is the expected return for Lately Lighthouse, Inc.? (Enter your answer as a percent rounded to two decimal places.) Expected return b. What is the standard deviation of returns for Lately Lighthouse, Inc.? (Enter your answer as a percent rounded to two decimal places.) Standard deviation Standard deviation [ %

Answer 1

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STATS - Microsoft Excel (Product Activation Failed) Add-Ins File Home Insert Page Layout Formulas Data Review View - 2x % Cut Σ AutoSum : A Calibri Dr General Wrap Text FMerce Merge & Center - Center BI U s $ % % , 4.0 .00 :.: Insert Delete Format Cell Styles Fill 2 Clear Conditional Format Formatting as Table Styles E Copy Paste Format Painter Clipboard CP596 -11AA = = = D- DA E E E Font for CL Find & Select Sort & Filter Editing Alignment Number Cells CK CM CN CO CP CO 578 579 580 581 YEAR WEIGHT VARIANCE 582 rate of return (R) 5% 15% 583 584 585 586 587 588 2012 2013 2014 2015 2016 EXPECTED RETURN SQUARED RETURN DEVIATION (S) DEVIATION (T) P*Q (R-E(R) = R-9.5385% S*S 0.6160% 2.781500% 0.0774% 2.0550% 4.1615% 0.1732% 1.5800% -1.6385% 0.0268% 2.7850% 1.6015% 0.0256% 2.5025% -2.3885% 0.0570% 9.5385% VARIANCE 12.32% 13.70% 7.90% 11.14% 7.15% E(R) = 20% P*T 0.0039% 0.0260% 0.0054% 0.0064% 0.0200% 0.0616% 25% 35% 589 590 591 592 ANSWER EXPECTED RETURN = 9.54% [rounded to 2 decimals] 593 594 595 596 STANDARD DEVIATION = STANDARD DEVIATION = STANDARD DEVIATION = SQRT (VARIANCE) SQRT(0.0616%) 2.48% [rounded to 2 decimalsi ANSWER 597 N P EMV MEAN STDV assignment DEAR Sheet2 COV TIME SERIES corr REGRESSION range CAMERA TREND freg_MATRIX V FV DIVIDEND ferences Rea INTERVAL, NORMAL HYPOTHIC BOJ 120% - * H 10 ENG O E R 21-11-2019