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Question
Submitted by robnrf on Mon, 2012-08-20 07:42
due on Fri, 2012-08-24 07:41
answered 1 time(s)
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P1. From the information below, compute the average annual return, the variance, standard deviation, and coefficient of variation for each asset.

P1. From the information below, compute the average annual return, the variance, standard deviation, and coefficient of variation for each asset.

Asset

Annual Returns

A

5%,10%,15%,4%

B

-6%,20%,2%,-5%,10%

C

12%,15%,17%

D

10%,-10%,20%,-15%,8%,-7%

 

 

Asset A

Asset B

Asset C

Asset D

 

5%

-6%

12%

10%

 

10%

20%

15%

-10%

 

15%

2%

17%

20%

 

4%

-5%

 

-15%

 

 

10%

 

8%

 

 

 

 

-7%

Average

9%

4%

15%

1%

Variance

0.0026

0.0119

0.0006

0.0186

Std. dev

5.07%

10.92%

2.52%

13.65%

Coeff of var.

0.60

2.60

0.17

13.65

 

P2. Based upon your answers to question 1, which asset appears riskiest based on standard deviation? Based on coefficient of variation?

                      ASSET D appears the riskiest based in standard & coefficient.

P3. Recalling the definitions of risk premiums in Chapter 8 and using the Treasury bill return in Table 12.4 as an approximation to the nominal risk-free rate, what is the risk premium from investing in each of the other asset classes listed in Table 12.4?

P4. What is the real, or after-inflation, return from each of the asset classes listed in table 12.4?

 

Treasury Bill

Treasury Bond

Stocks

Inflation  Rate

Annual Ave Return

3.8%

5.4%

11.1%

3.2%

Standard Deviation

3.0%

7.6%

20.4%

4.0%

 

 

Answer
Submitted by shahimermaid on Mon, 2012-08-20 08:17
teacher rated 378 times
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Answer rating (rated 2 times)

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p3 & P4

body preview (78 words)

P3

Risk xxxxxxx =  xxxxxx xx asset- risk free return

xxxxxxxx bill xxxxxx xx to xx used xx xx xxxxxxxxxxxxx to xxx xxxxxxx risk-free xxxxx

Risk premium for xxxxxxxx xxxxx xxx -3.8=1.6

xxxx xxxxxxx for xxxxxxxxxxxx 3.8 =7.3

xx

x xxxx xxxxxx is the rate of xxxxxx xxx receive xxxxx the impact xx inflationx 

Real return xxx treasury bill = 3.8 – 3.2 x xxxx

 xxxx xxxxxx for xxxxxxxx bond x xxxxxxx xxxxx

xxxx return xxx xxxxx  = xxxxxxxxxx = 7.95


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