1. Below are the historical arithmetic average returns and standard deviations for different asset classes. Asset...
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 small company stocks will be less than 7%?
c. What is the probability that the return on large company stocks will be greater than 5%?
2. You've recorded the following historical annual returns for a stock:
| Year | Return |
| 1 | 10% |
| 2 | 3% |
| 3 | -14% |
| 4 | 5% |
| 5 | 9% |
a. What was the standard deviation of returns?
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1. Below are the historical arithmetic average returns and
standard deviations for different asset classes.
Asset...
Problem 37 Intro Below are the expected returns for different asset classes for next year: Asset...
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