Calculate the observed risk premium in each year for the large-company stocks versusthe T-bills.b-1. What was the arithmetic average risk premium over this period? (A negativeanswer should be indicated by a minus sign. Do not round intermediatecalculations and enter your answer as a percent rounded to 2 decimal places,e.g., 32.16.)b-2. What was the standard deviation of the risk premium over this period? (Do notround intermediate calculations and enter your answer as a percent rounded to2 decimal places, e.g., 32.16.)b-1.b-2.> Answer is complete but not entirely correct.Average risk premiumRisk premium standard deviation-3.00 × %24.00 × % Consider the following table for a period of six years:Year123456Large-CompanyStocks- 16.09%-26.8937.5124.217.726.85ReturnsU.S.Treasury Bills7.57%8.136.156.475.598.06

Standard Deviation: It is a statistical measure used to measure the dispersion of a set of data…

Answered: b-1. What was the arithmetic average…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Which of the following are measures of risk?Question 8 options: 1) Expected value and standard deviation. 2) Standard deviation and beta. 3) Expected value and beta. 4) None of the above.
What do I put for the number any given year
The standard deviation of return on investment a is 0.10, while the standard deviation of return on investment b is 0.04. If the correlation coefficient between the returns on A and B is_____________. A. -0.0447 B. -0.0020 C. 0.0020 D. 0.0447
A change in the risk premium, E(Rm) - Rf, results in... a) A change in the vertical intercept of the Security Market Line (SML) b) No change in the return/beta relationship. c)A change in the horizontal intercept of the Security Market Line (SML) d)A change in the slope of the Security Market Line (SML)
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 2.60% + 0.90RM + eA RB = -2.00% + 1.20RM + eB OM = 26%; R-squarea = 0.21; R-squareg = 0.12 Assume you create portfolio P with investment proportions of 0.70 in A and 0.30 in B.
21. Which of the following statements is most accurate? If the covariance of returns between two assets is 0.0023, then: A. the assets' risk is near zero. B. the asset returns are unrelated. abia C. the asset returns have a positive relationship.
Suppose the returns on an asset are normally distributed. The historical average annual return for the asset was 5.7 percent and the standard deviation was 18.3 percent. a. What is the probability that your return on this asset will be less than –4.1 percent in a given year? Use the NORMDIST function in Excel® to answer this question. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What range of returns would you expect to see 95 percent of the time? (Enter your answers for the range from lowest to highest. A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c. What range of returns would you expect to see 99 percent of the time? (Enter your answers for the range from lowest to highest. A negative answer should be indicated by a minus sign. Do not round intermediate calculations…
An asset has an average return of 10.11 percent and a standard deviation of 19.02 percent. What range of returns should you expect to see with a 68 percent probability? Multiple Choice −18.42% to 38.64% −46.95% to 67.17% −8.91% to 11.31% −27.93% to 48.15% −8.91% to 29.13%
d. Interpret your results in (c) above, assuming that the historical average return of 8.5% from the stock is a good benchmark. e. Critically evaluate the strengths and weaknesses of applying the implied rate of return from the RIVM as a proxy of the expected return.
At a minimum, which of the following would you need to know to estimate the amount of additional reward you will receive for purchasing a risky asset instead of a risk-free asset? 1. I. Asset's standard deviation 2. II. Asset's beta 3. III. Risk-free rate of return 4. IV. Market risk premium I, III, and IV only I, II, III, and IV I and III only II and IV only III and IV only ооо O
An asset has an average return of 10.73 percent and a standard deviation of 20.70 percent. What range of returns should you expect to see with a 95 percent probability? Multiple Choice −9.97% to 31.43% −51.37% to 72.83% −30.67% to 52.13% −20.32% to 41.78% −9.97% to 11.49%
When using annual worth to evaluate the attractiveness of a single alternative, what value is the calculated AW compared to? a. PW b. FW c. 0.0d. MARR.

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