Question

Consider the following table for the total annual returns for a given period of time.   Series...

Consider the following table for the total annual returns for a given period of time.

  Series

Average return

Standard Deviation
  Large-company stocks 10.8 % 21.1 %
  Small-company stocks 16.4 33.0
  Long-term corporate bonds 6.2 8.4
  Long-term government bonds 6.1 9.4
  Intermediate-term government bonds 5.6 5.7
  U.S. Treasury bills 3.8 3.1
  Inflation 3.1 4.2
Requirement 1:

What range of returns would you expect to see 95 percent of the time for large-company stocks? (Negative amount should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers. Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)

  Expected range of returns % to   %
Requirement 2:

What about 99 percent of the time? (Negative amount should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers. Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

  Expected range of returns % to   %


Homework Answers

Answer #1

Part 1

For 95% probability, range would fall within +-2 SD.

Range = Average return – 2 SD   to average return + 2 SD

            = 10.80% - 2 x 21.10%   to 10.80% + 2 x 21.10%  

            = -31.40% to 53%

Part 2

For 99% probability, range would fall within +-3 SD.

Range = Average return – 3 SD   to average return + 3 SD

            = 10.80% - 3 x 21.10%   to 10.80% + 3x 21.10%  

            = -52.50% to 74.10%

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider the following table for the total annual returns for a given period of time. Series...
Consider the following table for the total annual returns for a given period of time. Series Average return Standard Deviation Large-company stocks 11.7 % 20.6 % Small-company stocks 16.4 33.0 Long-term corporate bonds 5.1 8.4 Long-term government bonds 6.1 9.4 Intermediate-term government bonds 5.6 5.7 U.S. Treasury bills 3.8 3.1 Inflation 3.1 4.2 What range of returns would you expect to see 95 percent of the time for long-term corporate bonds? (A negative answer should be indicated by a minus...
Problem 10-18 Return Distributions [LO 3] Consider the following table for different assets for 1926 through...
Problem 10-18 Return Distributions [LO 3] Consider the following table for different assets for 1926 through 2011.   Series Average return Standard Deviation   Large-company stocks 11.8 % 20.3 %   Small-company stocks 16.5 32.5   Long-term corporate bonds 6.4 8.4   Long-term government bonds 6.1 9.8   Intermediate-term government bonds 5.5 5.7   U.S. Treasury bills 3.6 3.1   Inflation 3.1 4.2 Requirement 1: What range of returns would you expect to see 68 percent of the time for large-company stocks? (Negative amount should be indicated by...
1. Over a particular period, an asset had an average return of 6.9 percent and a...
1. Over a particular period, an asset had an average return of 6.9 percent and a standard deviation of 9.9 percent. What range of returns would you expect to see 95 percent of the time for this asset? (A negative answer should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)...
Suppose the returns on an asset are normally distributed. The historical average annual return for the...
Suppose the returns on an asset are normally distributed. The historical average annual return for the asset was 5.9 percent and the standard deviation was 10.5 percent. a. What range of returns would you expect to see 95 percent of the time? (A negative answer should be indicated by a minus sign. Enter your answers for the range from lowest to highest. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g.,...
Problem 10-8 Risk Premiums [LO 2] Consider the following table for a period of six years:...
Problem 10-8 Risk Premiums [LO 2] Consider the following table for a period of six years: Returns Year Large-Company Stocks U.S. Treasury Bills 1 –15.99 % 7.55 % 2 –26.86 8.12 3 37.49 6.13 4 24.19 6.37 5 –7.68 5.58 6 6.83 8.03    Calculate the arithmetic average returns for large-company stocks and T-bills over this time period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Arithmetic average returns...
You are given the following information:      State of Economy Return on Stock A Return on...
You are given the following information:      State of Economy Return on Stock A Return on Stock B   Bear .111 -.054                Normal .106 .157                Bull .082 .242                 Assume each state of the economy is equally likely to happen.    Calculate the expected return of each of the following stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)    Expected return   Stock A %   Stock B...
You are given the following information: State of Economy Return on Stock A Return on Stock...
You are given the following information: State of Economy Return on Stock A Return on Stock B Bear .119 -.062 Normal .098 .165 Bull .090 .250 Assume each state of the economy is equally likely to happen. Calculate the expected return of each stock. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return Stock A ______% Stock B ______%    Calculate the standard deviation of each stock. (Do not...
Suppose we have the following returns for large-company stocks and Treasury bills over a six year...
Suppose we have the following returns for large-company stocks and Treasury bills over a six year period: Year Large Company US Treasury Bill 1    3.66 4.66 2   14.44 2.33 3   19.03 4.12 4 –14.65 5.88 5 –32.14 4.90 6   37.27 6.33 a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Average returns   Large company stocks %   T-bills...
Howell Petroleum, Inc., is trying to evaluate a generation project with the following cash flows: Year...
Howell Petroleum, Inc., is trying to evaluate a generation project with the following cash flows: Year Cash Flow 0 –$38,000,000      1 56,000,000      2 –9,000,000      a. If the company requires a 10 percent return on its investments, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Compute the IRRs for this project. (A negative answer should be indicated by a minus sign. Enter your...
Use the following table: Series Average return Large stocks 11.96 % Small stocks 16.66 Long-term corporate...
Use the following table: Series Average return Large stocks 11.96 % Small stocks 16.66 Long-term corporate bonds 6.33 Long-term government bonds 6.10 U.S. Treasury bills 3.93 Inflation 3.10 a. Determine the return on a portfolio that was equally invested in large-company stocks and long-term corporate bonds. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What was the return on a portfolio that was equally invested in small stocks...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT