The Wall Street Journal reported that the yield on common stocks is about 2 percent, whereas a study at the University of Chicago contends that the annual rate of return on common stocks since 1926 has averaged about 10 percent. Reconcile these statements
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A: formula of confidence interval: confidence interval=x±z×snwhere,x=meanz=z score for the…
Q: You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 19…
A: The average return of a stock represents an average annualized return for a specific time duration.…
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A: An investor can invest in different types of securities which can be risky or risk-free. The…
Q: Over a certain period, large-company stocks had an average return of 12.54 percent, the average…
A: Given: Risk free rate = 2.57% Small company stock return = 17.41%
Q: You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 12…
A: Average Nominal Return = (12% -9% +20% +17% +10%) / 5 Average Nominal Return = 50%/5 Average…
Q: You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 16…
A: The question is based on the calculation of average return and risk associated with the past data of…
Q: A stock has had returns of −19.2 percent, 29.2 percent, 26.4 percent, −10.3 percent, 35 percent, and…
A: geometric return = ((1-0.192)*(1+0.292)*(1+0.264)*(1-0.103)*(1+0.35)*(1+0.272))1/6 - 1 geometric…
Q: A stock has had returns of -5.32 percent, -7.58 percent, 4.68 percent, 7.7 percent, 8.98 percent,…
A: The below expression can be used to calculate geometric average return:
Q: LaPorta, Lakonishok, Shleifer, and Vishny (\Good News for Value Stocks," Journal of Finance, (June…
A: High returns are likely to occur due to the positive earnings surprise because during the result…
Q: If the covariance between two stocks is 115% and the standard deviation of both stocks are 23% and…
A: Answer 1. Information provided: covariance = 115% standard deviation of stock A = 23% standard…
Q: Over the past four years, large-company stocks and U.S. Treasury bills have produced the returns…
A: Here,
Q: You’ve observed the following returns on Yasmin Corporation’s stock over the past five years: 15…
A: a.Arithmetic average return on the company stock over this 5 year period is calculated by using…
Q: The rate of return on General Electric common stock over the coming year is normally distributed…
A: To find the Probability of Negative return Firstly one has to find the z Value.
Q: Over the past 4 years, large-company stocks and U.S. Treasury bills have produced the returns stated…
A: real rate of return=1+nominal rate of return1+inflation-1.....(1)
Q: a) The stock market of country A has an expected return of 5 percent, and standard deviation of…
A: The expected return and standard deviation of a portfolio: The expected return of a portfolio is the…
Q: The rates of return on Cherry Jalopies, Inc., stock over the last five years were 21 percent, 11…
A: Stocks refer to financial security which represents the ownership of a holder in the company. The…
Q: Consider the following information on large-company stocks for a period of years. Arithmetic…
A: Real Return = [(1+nominal) /(1+inflation)]-1
Q: You’ve observed the following returns on SkyNet Data Corporation’s stock over the past five years:…
A: a) Hence, the average real return is 11.20%.
Q: In a year in which corporate bonds offered an average return of 9%, treasury bonds offered an…
A: Market risk premium is the difference between the expected return of the stock and the risk free…
Q: Assume these were the inflation rates and U.S. stock market and Treasury bill returns between 1929…
A: NOTE: Since you have posted a question with multiple sub-parts, we will solve the first three…
Q: A stock has had returns of −19 percent, 29 percent, 24 percent, −10.1 percent, 34.8 percent, and 27…
A: Year Return 1 -19.00% 2 29.00% 3 24.00% 4 -10.10% 5 34.80% 6 27.00%
Q: Assume that over the last several decades, the annual returns on large-company common stocks…
A: Excess return earned by long-term government bonds = (long-term government bonds -U.S. T-bills)…
Q: You've observed the following returns on Yamauchi Corporation's stock over the past five years:…
A:
Q: Over a certain period, large-company stocks had an average return of 12.19 percent, the average…
A: Risk free rate = 2.50% Return on small-company stocks = 17.13%
Q: You find a certain stock that had returns of 13.2 percent, –21.6 percent, 27.6 percent, and 18.6…
A: The formula used is shown:
Q: According to Investopedia, from 199x until 199y, big-company stocks earned a mean return of 12.34%…
A: The expected return is the minimum required rate of return which an investor required from the…
Q: You recently purchased a stock that is expected to earn 19 percent in a booming economy, 8 percent…
A: Probability Return on stock Boom 20% 19.00% Normal 70% 8.00% Recession 10% -28.00% 100%…
Q: Over a certain period, large-company stocks had an average return of 12.79 percent, the average…
A: Given, Risk-free rate = 2.62% Return on given stock = 17.61% Risk premium = Return on given stock -…
Q: Suppose that your estimates of the possible one-year returns from investing in the common stock of…
A: A statistical measure that represents the variation in the return on the stock is term as the…
Q: You recently purchased a stock that is expected to earn 33 percent in a booming economy, 13 percent…
A: Excel Spreadsheet: Excel Workings:
Q: You find a certain stock that had returns of 15 percent, -22 percent, 23 percent, and 10 percent for…
A: Average return = total return for total period/ total period
Q: Two common stocks, Consolidated Edison and Apple, have the following expected return and standard…
A: Given:
Q: You find a certain stock that had returns of 10 percent, −17 percent, 23 percent, and 15 percent for…
A: Given: Returns = 10%, -17%, 23%, 15% Average return = 10%
Q: The average rate of return on investments in large stocks has outpaced that on investments in…
A: A Treasury bill is a financial debt instrument issued by the U.S. treasury department as a…
Q: You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 14…
A: Inflation rate=3.5%T-bill rate=4.2%
Q: A stock has had returns of 14 percent, −18 percent, 2 percent, 33 percent, 27 percent, and 6 percent…
A: Geometric mean formula: GM =61+R1×1+R2×1+R3×1+R4×1+R5×1+R6where,Rx =returns at respective year x
Q: Blue Bell stock is expected to return 23 percent in a boom, 16 percent in a normal economy, and lose…
A: Expected Return (E(X)) = 0.23*0.05 + 0.16*0.90 - 0.32*0.05 = 0.0115 + 0.144 - 0.016 = 0.1395
Q: Spike earned an average return of 14.6 percent on his investments over the past 20 years while the…
A: Efficient Market Hypothesis states that at any given time, the prices of the stock reflect all the…
Q: The table given below reports last five years data on annual rates of return (HPYS) on two stocks…
A: Athematic mean is average of returns
Q: You recently purchased a stock that is expected to earn 25 percent in a booming economy, 10 percent…
A: Probability Return on stock Boom 10% 25.00% Normal 75% 10.00% Recession (100%-(10%+75%) 15%…
Q: A stock has had returns of 16 percent, 13 percent, 6 percent, -14 percent, -6 percent, and 18…
A: Given the following information: Return 1 (R1) = 16% Return 2 (R2) = 13% Return 3 (R3) = 6% Return…
Q: What was the average real risk-free rate over this time period? (Do not round intermediate…
A: Given information: Average inflation rate = 3.25% Average risk free rate = 4.30% Return on stock for…
Q: e observed the following returns on Yamauchi Corporation’s stock over the past five years: –24.6…
A: We need to compute variance for the 5 years return of Yamauchi Corporation’s stock. Variance is a…
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
The Wall Street Journal reported that the yield on common stocks is about 2 percent, whereas a study at the University of Chicago contends that the annual
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- Each stock's rate of return in a given year consists of a dividend yield (which might be zero) plus a capital gains yield (which could be positive, negative, or zero). Such returns are calculated for all the stocks in the S&P 500. A weighted average of those returns, using each stock's total market value, is then calculated, and that average return is often used as an indicator of the "return on the market."You’ve observed the following returns on SkyNet Data Corporation’s stock over the past five years: 19 percent, 24 percent, 11 percent, −9 percent, and 13 percent. Suppose the average inflation rate over this period was 3.6 percent and the average T-bill rate over the period was 4.1 percent.a. What was the average real return on the company’s stock?b. What was the average nominal risk premium on the company’s stock?You've observed the following returns on Yamauchi Corporation's stock over the past five years: -29.1 percent, 16.4 percent, 35.8 percent, 3.7 percent, and 22.7 percent. The average inflation rate over this period was 3.37 percent and the average T-bill rate over the period was 4.3 percent. a. What was the average real return on the stock? (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 nominal risk premium on the stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Average real return b. Average nominal risk premium 6.32 % %
- Over a certain period, large-company stocks had an average return of 12.54 percent, the average risk-free rate was 2.57 percent, and small-company stocks averaged 17.41 percent. What was the risk premium on small-company stocks for this period?Historical stock returns show that small - company stocks produced an average return of 17.4 percent, inflation averaged 3.1 percent, U.S. Treasury bills returned an average 3.8 percent, and long - term corporate bonds returned 6.2 percent. What was the risk premium on small - company stocks for that period?Please include the excel formula You’ve observed the following returns on Pine Computer’s stock over the past five years: 8 percent, −12 percent, 14 percent, 21 percent, and 16 percent. Suppose the average inflation rate over this period was 3.1 percent and the average T-bill rate over the period was 3.9 percent. What was the average real return on the company’s stock? What was the average nominal risk premium on the company’s stock over this period? Input area: Year Returns 1 8% 2 -12% 3 14% 4 21% 5 16% Average inflation 3.10% Average T-bill rate 3.90% (Use cells A6 to B13 from the given information to complete this question. You must use the built-in Excel function to answer this question. Make sure to use the “sample” Excel formula.)…
- You've observed the following returns on Bennington Corporation's stock over the past five years: 13 percent, -8 percent, 16 percent, 16 percent, and 10 percent. Suppose the average inflation rate over this period was 1.5 percent and the average T-bill rate over the period was 5 percent. a. What was the average real risk-free rate over this time period? (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 real risk premium? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Average real risk-free rate b. Average real risk premium % %Some investors use the Sharpe ratio as a way of comparing the benefits of owning shares of stock in a company to the risks. The Sharpe ratio of a stock is defined as the ratio of the difference between the mean return on the stock and the mean return on government bonds (called the risk-free rate rf ) to the SD of the returns on the stock. The mean return on government bonds is rf = 0.03% per day. The table below describes the daily return of three stocks. Date APPLE. TESLA GM 01/10/20 0.85% 4.46% 2.67% 02/10/20 -3.23% - 7.38% 0.26% 05/10/20 3.08% 2.55% 1.64% 06/10/20 -2.87% -2.75% -1.81% 07/10/20 1.70% 2.73% 4.01% 08/10/20 -0.10% 0.15% 1.87% 09/10/20 1.74% 1.90% -0.16% 12/10/20 6.35% 1.91% 0.16% 13/10/20 -2.65% 0.98% -1.06% 14/10/20 0.07% 3.28% -0.63% 15/10/20 -0.40% -2.69% 2.90% 16/10/20 -1.40% -2.05%…You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 14 percent, –9 percent, 16 percent, 21 percent, and 3 percent. Suppose the average inflation rate over this period was 3.5 percent and the average T-bill rate over the period was 4.2 percent. a. What was the average real return on the company’s stock? b. What was the average nominal risk premium on the company’s stock?
- You've observed the following returns on Yamauchi Corporation's stock over the past five years: -27.9 percent, 15.6 percent, 34.2 percent, 3.3 percent, and 22.3 percent. The average inflation rate over this period was 3.33 percent and the average T-bill rate over the period was 4.3 percent. a. What was the average real risk-free rate over this time period? (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 real risk premium? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Average real risk-free rate b. Average real risk premium % %You've observed the following returns on Pine Computer's stock over the past five years: -28.5 percent, 16 percent, 35 percent, 3.5 percent, and 22.5 percent. The average inflation rate over this period was 3.35 percent and the average T-bill rate over the period was 4.3 percent. a. What was the average real risk-free rate over this time period? Note: 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 real risk premium? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. × Answer is not complete. a. Average real risk-free rate b. Average real risk premium 0.93 % %You’ve observed the following returns on Barnett Corporation’s stock over the past five years: –25.5 percent, 14 percent, 31 percent, 2.5 percent, and 21.5 percent. The average inflation rate over this period was 3.25 percent and the average T-bill rate over the period was 4.3 percent.What was the average real risk-free rate over this time period? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Average real risk-free rate % What was the average real risk premium? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Average real risk premium %