I invest in stocks for the same reason that Willie Sutton robbed banks: When asked why he robbed banks, Sutton simply replied, "Because that's where the money is." Asset Class Nominal Average Standard Deviation Annual Returns of Returns 1981-2020 1981-2020 Large company stocks 12.64% 16.06% Baa bonds 10.34% 7.67% 8.21% 9.92% 3.94% 3.39% Inflation 2.93% 1.76% Table 12.4 Arithmetic Average Annual Returns and Standard Deviation by Asset Class, 1981-2020 (source: Aswatch Damodaran Online) 1. Take the average returns expected from the four investments (not inflation) and divide them by the deviation (risk estimate). How do they rank from best to worst on return/risk? 10-year T-bonds US T-bills
I invest in stocks for the same reason that Willie Sutton robbed banks: When asked why he robbed banks, Sutton simply replied, "Because that's where the money is." Asset Class Nominal Average Standard Deviation Annual Returns of Returns 1981-2020 1981-2020 Large company stocks 12.64% 16.06% Baa bonds 10.34% 7.67% 8.21% 9.92% 3.94% 3.39% Inflation 2.93% 1.76% Table 12.4 Arithmetic Average Annual Returns and Standard Deviation by Asset Class, 1981-2020 (source: Aswatch Damodaran Online) 1. Take the average returns expected from the four investments (not inflation) and divide them by the deviation (risk estimate). How do they rank from best to worst on return/risk? 10-year T-bonds US T-bills
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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Transcribed Image Text:I invest in stocks for the same reason that Willie Sutton robbed banks: When
asked why he robbed banks, Sutton simply replied, "Because that's where the
money is."
Asset Class
Nominal Average Standard Deviation
Annual Returns
of Returns
1981-2020
1981-2020
Large company stocks 12.64%
16.06%
Baa bonds
10.34%
7.67%
8.21%
9.92%
3.94%
3.39%
Inflation
2.93%
1.76%
Table 12.4 Arithmetic Average Annual Returns and Standard Deviation by Asset
Class, 1981-2020 (source: Aswatch Damodaran Online)
1. Take the average returns expected from the four investments (not inflation)
and divide them by the deviation (risk estimate). How do they rank from best
to worst on return/risk?
10-year T-bonds
US T-bills
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