Calculate the equity premium on the following set of data: Stock market return: 12.5% Corporate bond return: 8.2% Short-term T- bills: 4.8% Inflation: 3.1% a. 7.7% b. 9.4% c. 8.2% d. 7.1%
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- Using the table below, Compute the convexity measure (in years) for bond 2 Bond 1 Bond 2 Coupon Yield to maturity Maturity (in years) Par value 6% 7% 6% 6% 4 $100 $100 $100 $108 Price O A. 14.763 12.652 OC. 13.312 OD. 13.927Consider the following average annual returns: Average Return 23.4% 13.4% 7% 6.4% 4.7% Investment Small Stocks S&P 500 Corporate Bonds Treasure Bonds Treasury Bills What is the excess return for the portfolio of small stocks? O A. 16.8% OB. 15.9% O C. 18.7% OD. 11.2%If the annual geometric mean for the equity risk premium is 8.4 percent, what percentage of the equity risk premium is consumed by trading costs of 1.2 percent?
- Assume the following Risk Premiums: DRP ? LP = 0.25% MRP =1.15% 10-year Government bonds yield 4.65% 10-year corporate bonds yield 6.75%. What is the default risk premium on corporate bonds?Subject:- financeIn a year in which corporate bonds offered an average return of 9%, treasury bonds offered an average return of 7%, common stocks offered an average return of 16% and Treasury bills offered 3%. The market risk premium was: ______%.
- Calculate the annual interest (in $) and current yield (as a %) of the bond. (Round your percentage to one decimal place.) Company Coupon Rate Annual Interest Market Price Current Yield Company 5 7.25% $ 101.00 7.18%Assume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market Return (%) T-Bill Return (%) 2016 13.0 0.2 2017 21.0 0.8 2018 -6.2 1.8 2019 29.8 2.1 2020 20.6 0.4 Required: What was the risk premium on common stock in each year? What was the average risk premium? What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.)-- expressed in % (NOTE: 11.31% & 13.68% is incorrect)Assume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market Return (%) T-Bill Return (%) 2016 13.0 0.2 2017 21.0 0.8 2018 -6.2 1.8 2019 29.8 2.1 2020 20.6 0.4 Required: What was the risk premium on common stock in each year? What was the average risk premium? What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.)
- The rate of return on which one of the following has a risk premium of 0%? Multiple Choice Long-term government bonds Long-term corporate bonds Intermediate-term government bonds U.S. Treasury bills Large-company stocksReview the following market information: Current Stock Market Return 11.25% Current T-Bill Price $979.43 Historic T-Bill Average Return 2.80% Historic Stock Market Average Return 8.10% Stock Beta 1.23 What is the required return (rounded to two places)?In a bond portfolio, the following are the present values of all cash flows by annual period: Year PV Cash flows (millions) 1 14.3 2 13.2 3 15.3 4 10.5 5 18.4 What is the percentage contribution to duration of the year 3 cash flows? Enter answer in percents.