Over a 44-year period an asset had an arithmetic return of 11.8 percent and a geometric...
Over a 44-year period an asset had an arithmetic return of 11.8 percent and a geometric return of 9.7 percent. Using Blume’s formula, what is your best estimate of the future annual returns over 7 years? 12 years? 22 years? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Future annual returns 7 years % 12 years % 22 years %
Homework Answers
Using Blume's formula Return at time(T) =(T-1)/(N-1)*Geometric
Return+(N-T)/(N-1)*Average Return
Return in 7 years=(7-1)/(44-1)*9.7%+(44-7)/(44-1)*11.80% =
11.51%
Return in 12 years
=(12-1)/(44-1)*9.7%+(44-12)/(44-1)*11.80%=11.26%
Return in 22 years =(22-1)/(44-1)*9.7%+(44-22)/(44-1)*11.80%
=10.77%
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Over a 44-year period an asset had an arithmetic return of 11.8
percent and a geometric...
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Over a 48-year period an asset had an arithmetic return of 13.2 percent and a geometric return of 11.1 percent. Using Blume’s formula, what is your best estimate of the future annual returns over 7 years? 13 years? 24 years? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
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Suppose the returns on an asset are normally distributed The historical average annual return for the asset was 76 percent and the standard deviation was 8.6 percent. What is the probability that your return on this asset will be less than 93 percent in a given year? Use the NORMDIST function in Excele to answer this question (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Probability What range of returns...
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