Question

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 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.) Expected range of returns % to %? What about 99 percent of the time? (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.) Expected range of returns % to %?

Answer #1

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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...

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 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 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.,...

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...

Use the following table:
Series
Average return
Large stocks
12.04
%
Small stocks
16.74
Long-term corporate bonds
6.37
Long-term government bonds
6.10
U.S. Treasury bills
3.97
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.)
Portfolio Return
%
b. What was the return on a portfolio that was
equally invested...

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
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 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...

Problem 10-28 Using Probability Distributions [LO 3] Suppose the
returns on long-term corporate bonds and T-bills are normally
distributed. Assume for a certain time period, long-term corporate
bonds had an average return of 5.8% and a standard deviation of
8.9%. For the same period, T-bills had an average return of 4.3%
and a standard deviation of 3.1%. Use the NORMDIST function in
Excel® to answer the following questions: a. What is the
probability that in any given year, the return...

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