Question

Problem 2, Please show work!

A. The returns on a bond are normally distributed with a mean of 6% and a standard deviation of 13%. Calculate the range of returns into which 99% of the returns are projected to fall.

B. From 2017 to 2020 the returns on a stock were: 12.2%, – 3.8% 1.7%, and 15.2% Calculate the average arithmetic return.

C. From 2017 to 2020 the returns on a stock were: 12.2%, – 3.8% 1.7%, and 15.2% Calculate the average geometric return.

D. Over a 20-year period, the geometric return for a stock = 9.1%, and the arithmetic return = 9.3%. Using Blume’s formula, calculate the forecast return for a 5-year period.

Answer #1

1.

Range is mean-2.58*standard deviation to mean+2.58*standard
deviation

Lower end=mean-2.58*standard deviation=6%-2.58*13%=-27.54000%

Upper end=mean+2.58*standard deviation=6%+2.58*13%=39.54000%

2.

=Sum(returns)/n

=(12.2%-3.8%+1.7%+15.2%)/4

=6.32500%

3.

=(Product(1+returns))^(1/n)-1

=((1+12.2%)*(1-3.8%)*(1+1.7%)*(1+15.2%))^(1/4)-1

=6.04381%

4.

=(5-1)/(20-1)*9.1%+(20-5)/(20-1)*9.3%

=9.25789%

The annual returns on the stock of a firm during the last four
years are provided below.
___________________________________
Year Return
___________________________________
2016
–0.10 (or –10%)
2017
0.10 (or 10%)
2018
0.15 (or 15%)
2019
0.25 (or 25%)
__________________________________
a) Find the holding period return of the stock over the
four-year period.
b) Compute the arithmetic average return of the stock over the
four-year period.
c) Calculate the geometric average return of the...

The annual returns on the stock of a firm during the last four
years are provided below.
___________________________________
Year Return
___________________________________
2016
–0.10 (or –10%)
2017
0.10 (or 10%)
2018
0.15 (or 15%)
2019
0.25 (or 25%)
__________________________________
a) Find the holding period return of the stock over the
four-year period.
b) Compute the arithmetic average return of the stock over the
four-year period.
c) Calculate the geometric average return of the...

1. We have the following information for the XYZ stock:
Year Annual
Return
2014
10%
2015
-15%
2016
15%
2017 20%
a. Calculate the arithmetic average annual return.
b. Calculate the geometric average annual return.
c. Calculate the standard deviation of the returns.
d. If $1000 is invested in the stock at the start of 2014, how
much will it become by year-end 2017?
2.An investor invested $1000 in a mutual fund at the...

Suppose the returns on an asset are normally distributed. The
average annual return for the asset over some period was 6.6
percent and the standard deviation of this asset for that period
was 9.0 percent.
Based on this information, what is the approximate probability
that your return on this asset will be less than -3.1 percent in a
given year?
What range of returns would you expect to see 95 percent of the
time?
What...

5. Consider the rate of return of stocks ABC and XYZ.
Year
rABC
rXYZ
1
20%
30%
2
12
12
3
14
18
4
3
0
5
1
−10
a. Calculate the arithmetic average return on these stocks over
the sample period.
b. Which stock has greater dispersion around the mean
return?
c. Calculate the geometric average returns of each stock. What
do you conclude?
d. If you...

The annual returns on Googol's stock share for the last four
years were Normally distributed and equalled: 16 %, 8 %, -17 %, and
21 %, respectively. Using this information you can say that 95 % of
the time the return over one year period lies in the following
range:
Multiple Choice
between -50.54 % and 57.61 %
between -47.68 % and 54.68 %
between -26.74 % and 40.74 %
between -9.87 % and 23.87 %

Suppose the returns on long-term corporate bonds are normally
distributed. The average annual return for long-term corporate
bonds from 1926 to 2007 was 5.2 percent and the standard deviation
of those bonds for that period was 9.4 percent.
(a)
Based on this historical record, what is the approximate
probability that your return on these bonds will be less than -2.9
percent in a given year? (Do not round intermediate
calculations.)
18.47%
20.22%
19.44%
38.88%
20.41%
(b)
What range of...

Assume these were the inflation rates and stock market and
Treasury bill returns between 1929 and 1933:
Year
Inflation
Stock Market Return
T-Bill Return
1929
.1
–11.8
6.1
1930
–3.7
–30.6
3.8
1931
–8.5
–40.6
1.3
1932
–10.4
–9.3
1.0
1933
.5
57.2
.6
a. What was the real return on the stock market
in each year? (Negative answers should be indicated by a
minus sign. Do not round intermediate calculations. Enter your
answers as a percent rounded to 2...

1. Using the data in the table to the right,
calculate the return for investing in the stock from January 1 to
December 31. Prices are after the dividend has been paid.
Date Price Dividend
1/2/03 $32.24 -
2/5/03 $30.91 $0.19
5/14/03 $30.98 $0.18
8/13/03 $32.83 $0.17
11/12/03 $39.42 $0.18
1/2/04 $40.14 -
What is the return for the entire period? (round to two decimal
places)
2. Ten annual returns are listed in the
following table:
−19.6%
16.8%
18.2%
−49.6%...

13. A stock had
returns of 16.70% (1 year ago), 21.60% (2 years ago), X (3 years
ago),
and -31.20% (4 years ago) in each of the past 4 years. Over the
past 4 years, the geometric average annual return for the stock was
3.34%. Three years ago, inflation was 4.35% and the risk-free rate
was 5.63%. What was the real return for the stock 3 years ago?
A. 11.94% (plus or
minus 0.03 percentage points)
B. 21.89% (plus or...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 7 minutes ago

asked 8 minutes ago

asked 17 minutes ago

asked 19 minutes ago

asked 28 minutes ago

asked 28 minutes ago

asked 33 minutes ago

asked 37 minutes ago

asked 37 minutes ago

asked 43 minutes ago

asked 48 minutes ago

asked 50 minutes ago