Homework Answers
Standard deviation of returns on common stocks = 19.9 %
It is provided in second table ( Standard deviation of return, 1900-2015 ).
Standard deviation is a measure of risk (volatility). A stock with high standard deviation is more risky because a high standard deviation of returns indicates that return of stock fluctuate a lot.
Hope this will help, please do comment if you need any further explanation. Your feedback would be appreciated.
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Use the data in the tables below to answer the following questions: Average rates of return...
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Here are the average rates of return for common stocks and Treasury bills for four different...
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Consider the following rates of return: Year Large-Company Stocks US Treasury Bills 1 3.99 % 4.59...
Consider
the following rates of return: Year Large-Company Stocks US
Treasury Bills 1 3.99 % 4.59 % 2 14.16 4.94 3 19.25 3.86
4 –14.43 6.99
5 –31.92 5.30 6 37.49 6.20 a. Calculate the arithmetic average
returns for large-company stocks and T-bills over this period b.
Calculate the standard deviation of the returns for large-company
stocks and T-bills over this period. c. Calculate the observed risk
premium in each year for the large-company stocks versus the
T-bills. What was...
Consider the following rates of return: US Large- Year Company Stocks 1 3.66 % 14.44 3 19.03 -14.65 -32.14 6 37.27 Treasury Bills 4.66 % 2.33 4.12 5.88 4.90 6.33 5 a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Average returns Large-company stocks T-bills b. Calculate the standard deviation of the returns for large-company stocks...
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Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $56. The stock will pay a dividend at year-end of $4.00. Assume that risk-free Treasury securities currently offer an interest rate of 1.9%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2017 (figures in percent per year) are as follows. Average Premium (Extra return versus Treasury bills) (%) Portfolio...
Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $51. The stock will pay a dividend at year-end of $3.00. Assume that risk-free Treasury securities currently offer an interest rate of 2.1%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2017 (figures in percent per year) are as follows. Average Premium (Extra return versus Treasury bills) (%) Portfolio...
Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $55. The stock will pay a dividend at year-end of $2.50. Assume that risk-free Treasury securities currently offer an interest rate of 2.5%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2017 (figures in percent per year) are as follows. Average Premium (Extra return versus Treasury bills) (%) Portfolio...
Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $57. The stock will pay a dividend at year-end of $2.00. Assume that risk-free Treasury securities currently offer an interest rate of 1.8%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900–2017 (figures in percent per year) are as follows. Average Premium (Extra return versus Treasury bills) (%) Portfolio...
Here are the average rates of return for common stocks and Treasury bills for four different periods: 1900-1928 1929-1957 1958-1986 1987-2015 12,0% 4.9 9.8% 1.0 12.2% 6.1 12.0% 3.8 Stocks Treasury bills What was the risk premium on stocks for each of these periods?
Consider
the following rates of return: Year Large-Company Stocks US
Treasury Bills 1 3.99 % 4.59 % 2 14.16 4.94 3 19.25 3.86
4 –14.43 6.99
5 –31.92 5.30 6 37.49 6.20 a. Calculate the arithmetic average
returns for large-company stocks and T-bills over this period b.
Calculate the standard deviation of the returns for large-company
stocks and T-bills over this period. c. Calculate the observed risk
premium in each year for the large-company stocks versus the
T-bills. What was...
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