Question

1. What should we use for expected market return?

a. 10-year arithmetic average return of S&P 500 index.

b. 10-year geometric average return of S&P 500 index.

c. 80-year arithmetic average return of S&P 500 index.

d. 80-year geometric average return of S&P 500 index.

Answer #1

Proper solution is given.

What should we use for expected market return?
10-year arithmetic average return of S&P 500 index.
10-year geometric average return of S&P 500 index.
80-year arithmetic average return of S&P 500 index.
80-year geometric average return of S&P 500 index.

Consider the following five monthly returns. The arithmetic
average monthly return over this period is 1.40% and the geometric
average monthly return over this period is 1.33%. Explain the
difference between the arithmetic average return and the geometric
average return. Are both numbers useful? If so, explain why?
3% -1% 2% 7% -4%
Choose the correct answer below.
Both numbers are useful. The geometric average return tells you
what you would actually make if you held the stock over this...

We know that during the last 10 years, the average historical
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inflation rate and average risk-free rate over the last 10 years
are 2% and 5%, respectively. What is the real risk premium using
the exact Fisher equation?
Select one:
a. 2.94%
b. 6.86%
c. 7.00%
d. 9.80%
e. 10.00%
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Year...

What is the 30yr and 10yr average return for S&P 500
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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
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2.An investor invested $1000 in a mutual fund at the...

You have the option to invest in an S&P 500 Index fund that
guarantees the average performance of stocks in the index. Assume
that exactly 500 companies are in the economy and thus beta for
this index fund is equal to 1, while the expected return of this
index fund is 20%. An alternative risk-free asset has a return rate
of 10%. Using the straight-line tool, draw the market line that
plots the relationship between expected returns and beta.
Consider...

Suppose that the S&P 500, with a beta of 1.0, has an
expected return of 10% and Treasury bills provide a risk-free
return of 4%.
a. How would you construct a portfolio from these two assets
with an expected return of 8%? Specifically, what will be the
weights in the S&P 500 versus T-bills
b. How would you construct a portfolio from these two assets
with a beta of 0.4?
c. Find the risk premiums of the portfolios in (a)...

Suppose that the S&P 500, with a beta of 1.0, has an
expected return of 10% and T-bills provide a risk-free return of
4%.
a. How would you construct a portfolio from these two assets
with an expected return of 8%? Specifically, what will be the
weights in the S&P 500 versus T-bills?
b. How would you construct a portfolio from these two assets
with a beta of 0.4?
c. Find the risk premiums of the portfolios in (a) and...

1.Use the following information to answer the question(s)
below.
Suppose that the market portfolio is equally likely to increase
by 24% or decrease by 8%. Security "X" goes up on average by 29%
when the market goes up and goes down by 11% when the market goes
down. Security "Y" goes down on average by 16% when the market goes
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Over the 10 year period from 2001-2018, the geometric average
return for APPLE was 8.2 % and the arithmetic average return was
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years into the futures.

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