Question

You can arrive at this rate by calculating the arithmetic mean average of a series of...

You can arrive at this rate by calculating the arithmetic mean average of a series of historical returns (rates). a. the real rate b. the nominal rate c. the required rate d the expected rate e risk free rate

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The answer is Option D(The Expected Rate)

The expected rate of Return is a predicted or estimated return and may or may not occur. Its calculation is based upon the past performance in the market. It is however not guaranteed. For example, If a Stock M has returns of 11%, 12% and 13% in the past three years. Then, the Expected Return of Stock M is calculated as follows:

ie. (By using Sum of returns/ No. of years)

    

ie. 0.12 or 12%

This 12% is based upon the average of past three years.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider the following information on large-company stocks for a period of years. Series Arithmetic Mean Large-company...
Consider the following information on large-company stocks for a period of years. Series Arithmetic Mean Large-company stocks 15.5 % Inflation 3.6 a. What was the arithmetic average annual return on large-company stocks in nominal terms? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Nominal return 11.49 % b. What was the arithmetic average annual return on large-company stocks in real terms?
9. Calculating Returns and Variability You’ve observed the following returns on Yasmin Corporation’s stock over the...
9. Calculating Returns and Variability You’ve observed the following returns on Yasmin Corporation’s stock over the past five years: 19 percent, −13 percent, 7 percent, 25 percent, and 16 percent. a. What was the arithmetic average return on the company’s stock over this five-year period? b. What was the variance of the company’s stock returns over this period? The standard deviation? 10. Calculating Real Returns and Risk Premiums In Problem 9, suppose the average inflation rate over this period was...
Which of the following statements is FALSE? A. For a long-term forecast, you can be overly...
Which of the following statements is FALSE? A. For a long-term forecast, you can be overly pessimistic if you use geometric average returns. B. For a short-term forecast, you can be overly pessimistic if you use geometric average returns. C. For a long-term forecast, you need to use geometric average of historical returns. D. An investor can use weighted average of geometric and arithmetic average returns to forecast future returns. E. For a short-term forecast, you need to use arithmetic...
Calculating interest rates The real risk-free rate (r*) is 2.8% and is expected to remain constant....
Calculating interest rates The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 7% per year for each of the next four years and 6% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t – 1)%, where t is the security’s maturity. The liquidity premium (LP) on all Gauge Imports Inc.’s bonds is 1.05%. The following table shows the current relationship between bond ratings and default risk premiums (DRP):...
Calculating Interest rates The real risk-free (r*) is 2.8% and is expected to remain constant. Inflation...
Calculating Interest rates The real risk-free (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 7% per year for each of the next three years and 6% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t-1)%, where t is the security's maturity. The liquidity premiums (LP) on all BTR Warehousing's bonds is 1.05%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating Default Risk Premium...
The real rate of interest of a risk free bond is equal to: a The nominal...
The real rate of interest of a risk free bond is equal to: a The nominal interest rate minus the premium for expected inflation b The nominal interest rate plus the risk premium c The nominal interest rate minus the risk premium d The nominal interest rate plus a plus the premium for expected inflation
Using the following returns, calculate the arithmetic average returns, the variances, and the standard deviations for...
Using the following returns, calculate the arithmetic average returns, the variances, and the standard deviations for X and Y.    Returns Year X Y 1 6 %     19 %     2 24         40         3 13         -13         4 -14         -27         5 15         48             Requirement 1: (a) Calculate the arithmetic average return for X. a.9.94% b.11.00% c.7.13% d.10.74 e.%8.80%     (b) Calculate the arithmetic average return for Y. a.13.40% b. 10.85% c.15.14%...
Using the following returns, calculate the arithmetic average returns, the variances, and the standard deviations for...
Using the following returns, calculate the arithmetic average returns, the variances, and the standard deviations for X and Y.    Returns Year X Y 1 12 %     21 %     2 30         42         3 19         -7         4 -20         -21         5 21         50             Requirement 1: (a) Calculate the arithmetic average return for X. A. 12.40% B. 10.04% C. 15.13% D. 15.50% E. 14.01%     (b) Calculate the arithmetic average return for...
a. What is realised real interest rate? Can a change in expected inflation rate affect the...
a. What is realised real interest rate? Can a change in expected inflation rate affect the realised real interest rate? Explain. b. Suppose that there is an increase in expected inflation rate from 3 percent to 6 percent. Given that the after-tax expected real interest rate remains unchanged at 2 percent and the tax rate is 30 percent, find the original and the new nominal interest rates. c. Suggest ONE way in which investors can reduce/avoid the risk of unexpected...
Both the average (arithmetic mean) and the median of a set of 7 numbers equal 20....
Both the average (arithmetic mean) and the median of a set of 7 numbers equal 20. If the smallest number in the set is 5 less than half the largest number, what is the largest possible number in the set? (A) 40 (B) 38 (C) 33 (D) 32 (E) 30
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT