4. On a spread sheet use the SBBI data file to input the 23 annual total returns for both large stocks and small stocks for each year from the beginning of the year 2000 through the end of the year 2023. For each series: a. Compute a wealth index initialized at $1 on December 31, 1999, ending on December 31, 2023. b. Compute the arithmetic average annual return. c. Compute the geometric average return (the annualized rate of return). d. Compute the annualized standard deviation. 5. Stock and bond risk premiums a. List all the premiums, including the real interest rate. What was the annual historical geometric mean and arithmetic mean for each premium (or difference) over 1926-2023? b. How do the realized premiums for the calendar year 2024 (as of October 31) compare to the long-term premiums (1926-2023)? You can use any data source, and you can approximate. 6. Annualized rates of return a. If the interest rate is 0.6 per month, what is the annualized interest rate? b. If the returns over three years are +25%, -35%, +20%, what is the annualized rate of return? What is the arithmetic mean return per year? Why are the returns so different? c. If the standard deviation is 5% per month, what is the annualized standard deviation? d. If the annual standard deviation is 18% per year, what is the daily standard deviation?
4. On a spread sheet use the SBBI data file to input the 23 annual total returns for both large stocks and small stocks for each year from the beginning of the year 2000 through the end of the year 2023. For each series: a. Compute a wealth index initialized at $1 on December 31, 1999, ending on December 31, 2023. b. Compute the arithmetic average annual return. c. Compute the geometric average return (the annualized rate of return). d. Compute the annualized standard deviation. 5. Stock and bond risk premiums a. List all the premiums, including the real interest rate. What was the annual historical geometric mean and arithmetic mean for each premium (or difference) over 1926-2023? b. How do the realized premiums for the calendar year 2024 (as of October 31) compare to the long-term premiums (1926-2023)? You can use any data source, and you can approximate. 6. Annualized rates of return a. If the interest rate is 0.6 per month, what is the annualized interest rate? b. If the returns over three years are +25%, -35%, +20%, what is the annualized rate of return? What is the arithmetic mean return per year? Why are the returns so different? c. If the standard deviation is 5% per month, what is the annualized standard deviation? d. If the annual standard deviation is 18% per year, what is the daily standard deviation?
Chapter13: Direct Foreign Investment
Section: Chapter Questions
Problem 1IEE
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Please answer the questions in the attached image.
Transcribed Image Text:4. On a spread sheet use the SBBI data file to input the 23 annual total returns for both large
stocks and small stocks for each year from the beginning of the year 2000 through the end of
the year 2023. For each series:
a. Compute a wealth index initialized at $1 on December 31, 1999, ending on December 31,
2023.
b. Compute the arithmetic average annual return.
c. Compute the geometric average return (the annualized rate of return).
d. Compute the annualized standard deviation.
5. Stock and bond risk premiums
a. List all the premiums, including the real interest rate. What was the annual historical
geometric mean and arithmetic mean for each premium (or difference) over 1926-2023?
b. How do the realized premiums for the calendar year 2024 (as of October 31) compare to the
long-term premiums (1926-2023)? You can use any data source, and you can approximate.
6. Annualized rates of return
a. If the interest rate is 0.6 per month, what is the annualized interest rate?
b. If the returns over three years are +25%, -35%, +20%, what is the annualized rate of return?
What is the arithmetic mean return per year? Why are the returns so different?
c. If the standard deviation is 5% per month, what is the annualized standard deviation?
d. If the annual standard deviation is 18% per year, what is the daily standard deviation?
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