Question

You observe an investment that has the following historical returns:

Year |
Return |

1 | -4.66% |

2 | 0.90% |

3 | 10.81% |

4 | 14.17% |

5 | 15.33% |

6 | 9.14% |

7 | -28.62% |

8 | 12.76% |

9 | 42.87% |

10 | -5.67% |

What was the average (arithmetic mean) return over the 10 year period?

What was the investment's variance over the 10 year period?

What was the investment's standard deviation over the 10 year period?

Assuming the 10 years of return are normally distributed and representative of future returns (big, big assumption!), what is the range of future investment returns 68% of the time (roughly 2 out of every 3 years) in the future?

Answer #1

Security X has the following historical
returns.
Year
Return
1
10%
2
5%
3
-8%
4
7%
What is the average return of security X (arithmetic
return)? (5 points)
What is the standard deviation of security X? (5
points)
What range of returns would you expect to see 95% of the
time for this security? (5 points)
What is the geometric return of security X? (5
points)

You observe the following annual rates of return over the
previous 6 years:
Year
Rate of return
1
20%
2
30%
3
10%
4
-40%
5
-20%
6
30%
What is the arithmetic annual average return? Please state your
answer in percentage form with two digits after the decimal, e.g.,
10.00 represents 10%.
What is the geometric annual average return? ? Please state your
answer in percentage form with two digits after the decimal, e.g.,
10.00 represents 10%.
If...

According to Carlo’s stock broker, Investment A has relatively
high historical rates of return, and so he is recommending the
purchase of Investment A. Carlo’s insurance advisor, on the other
hand, is recommending the purchase of Investment B based on its
historical rates of return. And still another advisor is
recommending the purchase of a third investment (Investment C)
based on its historical returns. Carlo is trying to determine which
of the three investments is best, and he is focusing...

Over a 50 year period an asset had an arithmetic return of 12.1
percent and geometric return of 10 percent.
Musing Blume’s formula, what is your best estimate of the
future annual returns over 10 years? 15 years? 25 years?

Problem 2-14
Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Year
Stock X
Stock Y
Market
2011
16%
12%
13%
2012
19
7
10
2013
-15
-2
-14
2014
4
1
1
2015
24
9
17
Assume that the risk-free rate is 4% and the market risk premium
is 7%. Do not round intermediate calculations.
What is the beta of Stock X? Round your answer to two decimal
places.
What is...

8-20 REALIZED RATES OF RETURN Stocks A and B have the following
historical returns:
Year Stock A's Returns, rA. Stock B's Returns, rB
2011 (18.00%) (14.50%)
2012 33.00 21.80
2013 15.00 30.50
2014 (0.50) (7.60)
2015 27.00 26.30
a. Calculate the average rate of return for each stock during
the period 2011 though 2015.
b. Assume that someone held a portfolio consisting of 50% of
Stock A and 50% of Stock B. What would the realized rate of return
on...

3.You make an investment and the annual returns are as follows:
Year Return 1 45% 2 12 3 -8 4 20.25 The average annual return is
17.31 percent. What is the true annualized return?

Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Year
Stock X
Stock Y
Market
2012
16%
14%
14%
2013
21
7
11
2014
-14
-3
-10
2015
5
2
1
2016
21
9
17
Assume that the risk-free rate is 3% and the market risk premium
is 6%. Do not round intermediate calculations.
What is the beta of Stock X? Round your answer to two decimal
places.
What is the beta of...

Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Year
Stock X
Stock Y
Market
2011
15%
14%
10%
2012
19
6
12
2013
-17
-3
-12
2014
3
2
3
2015
19
12
17
Assume that the risk-free rate is 6% and the market risk premium
is 6%. Do not round intermediate calculations.
What is the beta of Stock X? Round your answer to two decimal
places.
What is the beta of...

Please answer all parts of Question 1 using the following
data:
Year
IBM’s yearly stock return
Yearly return on the S&P500
1999
17.02%
21.04%
2000
-21.21%
-9.10%
2001
13.09%
-1.89%
2002
16.22%
-22.10%
The riskless rate for this period is 3.5%, and the covariance
between returns on IBM stock and the S&P500 over this period is
0.02276.
1A. What is IBM’s arithmetic mean yearly return over this
period?
1B. What is IBM’s geometric mean yearly return over this
period?
1C....

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 4 minutes ago

asked 4 minutes ago

asked 4 minutes ago

asked 16 minutes ago

asked 47 minutes ago

asked 57 minutes ago

asked 58 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago