Asset |
Average |
Return Standard Deviation |
Canadian common stocks |
13.20% |
16.62% |
US common stocks |
15.59% |
16.86% |
Long bonds |
7.64% |
10.57% |
Small-company stocks |
14.79% |
23.68% |
Treasury bills |
6.04% |
4.04% |
1.
95% confidence interval: 14.79%-1.96*23.68% to 14.79%+1.96*23.68% i.e., from -31.62% to +61.20%
99% confidence interval: 14.79%-2.58*23.68% to 14.79%+2.58*23.68% i.e., from -46.30% to +75.88%
Hence 70% would lie in 99% confidence interval but not in 95% confidence interval
2
=6.04%+0.99446*4.40%=10.08%
Asset Average Return Standard Deviation Canadian common stocks 13.20% 16.62% US common stocks 15.59% 16.86% Long...
1. Below are the historical arithmetic average returns and standard deviations for different asset classes. Asset class Mean return Standard deviation T-bills 0.035 0.031 Corporate bonds 0.063 0.084 Small company stocks 0.169 0.323 Large company stocks 0.121 0.202 Assume that the returns are normally distributed. Use a standard normal table to answer the following questions. a. What is the probability that the return on corporate bonds will be less than 7%? b. What is the probability that the return on...
Historical average returns for Large Company Common Stocks, Long Term Government Bonds, and US Treasury Bills for the period 10-year period of 1999 through 2008 are shown in the following table. Use these data to solve the next several problems. Year Large Common Stock Long Term Government Bonds US Treasury Bills 1999 0.2104 -0.0751 0.0480 2000 -0.0910 0.1722 0.0598 2001 -0.1189 0.0551 0.0333 2002 -0.2210 0.1515 0.0161 2003 0.2889 0.0201 0.0094 2004 0.1088 0.0812 0.0114 2005 0.0491 0.0689 0.0279 2006 0.1579...
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