Question

The following return series comes from Global Financial Data.

Year | Large Stocks | LT Gov Bonds | US T-bills | CPI |

2014 | 13.69% | 24.71% | 0.02% | 0.76% |

2015 | 1.38% | 0.65% | 0.02% | 0.73% |

2016 | 11.96% | 1.75% | 0.20% | 2.07% |

2017 | 21.83% | 6.24% | 0.80% | 2.11% |

2018 | -4.38% | -0.57% | 1.81% | 1.91% |

Calculate the average nominal return earned on large-company stocks. (Enter percentages as decimals and round to 4 decimals)

Calculate the average real return earned on large-company stocks. (Enter percentages as decimals and round to 4 decimals)

Calculate the average risk premium earned on large company stocks. (Enter percentages as decimals and round to 4 decimals)

Calculate the average real risk premium earned on large-company stocks. (Enter percentages as decimals and round to 4 decimals)

Calculate the average risk premium earned on US Tbills. (Enter percentages as decimals and round to 4 decimals)

Calculate the average rate of inflation. (Enter percentages as decimals and round to 4 decimals)

Answer #1

Year | Large | LT Gov | US T-bill | CPI |

2014 | 13.69% | 24.71% | 0.02% | 0.76% |

2015 | 1.38% | 0.65% | 0.02% | 0.73% |

2016 | 11.96% | 1.75% | 0.20% | 2.07% |

2017 | 21.83% | 6.24% | 0.80% | 2.11% |

2018 | -4.38% | -0.57% | 1.81% | 1.91% |

Average | 8.8960% | 6.5560% | 0.5700% | 1.5160% |

Average can be calculated using mathematical formula of summing all values and dividing by 5.

Average Nominal Return = 8.8960%

Average Real Rate = Average Large Cap - Average CPI = 8.8960% - 1.5160% = 7.3800%

Average Real Risk Premium = Average Real Rate - Average T-bill = 7.38% - 0.57% = 6.8100%

Average risk premium = 8.8960% - 0.57% = 8.3260%

Average inflation = 1.5160%

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...

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...

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?

Look at the period from 1970 through 1975:
Index
Large Company Stocks
Long Term Government Bonds
US Treasury Bills
Consumer Price Index
1970
3.94
18.92
6.5
5.57
1971
14.3
11.24
4.36
3.27
1972
18.99
2.39
4.23
3.41
1973
-14.69
3.3
7.29
8.71
1974
-26.47
4
7.99
12.34
1975
37.23
5.52
5.87
6.94
a. Calculate the arithmetic average returns for large-company
stocks and T-bills over this period.
b. Calculate the standard deviation of the returns for
large-company stocks and T-bills over...

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...

Large company stocks 12%
Small company stocks 16.6%
Long term corporate bonds 6.3%
Long term government bonds 6.0%
US treasury bills 3.4%
Inflation 3.0%
a.
What was the average annual return on large-company stock from
1926 through 2016 in nominal terms? (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 average annual return on large-company stock from
1926 through 2016 in real terms? (Do not round...

Question 6 (1 point)
The average compound return earned per year over a multiyear
period is called the _____ average return
Question 6 options:
Arithmetic
Geometric
Standard
Variant
Real
Question 7 (1 point)
The average compound return earned per year over a multiyear
period is called the _____ average return
Question 7 options:
Variant
Geometric
Arithmetic
Real
Standard
Question 8 (1 point)
The return earned in an average year over a multiyear period is
called the _____ average return.
Question...

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...

The following data are the returns for 1980 through 1986 on five
types of capital-market instruments: common stocks,
small-capitilzation stocks, long-term corporate bonds, long-term
U.S. government bonds, and U.S. Treasury Bills. You may wish to use
a spreadsheet program to make your calculations.
Year
Common Stock
Small Stocks
Long-term Corporate Bonds
Long-term Government Bonds
U.S. Treasury Bills
1980
0.3242
0.3988
-0.0262
-0.0395
0.1124
1981
-0.0491
0.1388
-0.0096
0.0185
0.1471
1982
0.2141
0.2801
0.4379
0.4035
0.1054
1983
0.2251
0.3967
0.0470
0.0068...

The following table shows the nominal returns on Brazilian
stocks and the rate of inflation.
Year
Nominal Return (%)
Inflation (%)
2012
0.2
7.0
2013
-18.0
7.1
2014
-16.0
7.6
2015
-42.6
11.9
2016
67.4
7.5
2017
28.1
4.1
a. What was the standard deviation of the
market returns? (Use decimals, not percents, in your
calculations. Do not round intermediate calculations. Enter your
answer as a percent rounded to 2 decimal places.)
b. Calculate the average real return.
(A negative...

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