Part C The table gives prices for gold and the New York Stock Exchange Composite Index, which is a fund that averages all the stocks listed on the exchange. The Bureau of Labor Statistics says the inflation rate between 1980 and 2010 was 174%, or about 3.5% a year. Using the data in the table, compare the volatility and returns of gold and the index fund. Finally, use the inflation rate to compare the real rates of return of the two investments. If a friend invested $1,000 in 1980, which investment would make her the most money? Gold (one ounce) NYSE Composite Jan. 1980 $850 $682 Jan. 1990 $406 $1,937 Jan. 2000 $287 $6,772 Jan. 2010 $1,104 $7,140 Return 30% 947% Annual Return 196 32%

Part C The table gives prices for gold and the New York Stock Exchange Composite Index, which is a fund that averages all the stocks listed on the exchange. The Bureau of Labor Statistics says the inflation rate between 1980 and 2010 was 174%, or about 3.5% a year. Using the data in the table, compare the volatility and returns of gold and the index fund. Finally, use the inflation rate to compare the real rates of return of the two investments. If a friend invested $1,000 in 1980, which investment would make her the most money? Gold (one ounce) NYSE Composite Jan. 1980 $850 $682 Jan. 1990 $406 $1,937 Jan. 2000 $287 $6,772 Jan. 2010 $1,104 $7,140 Return 30% 947% Annual Return 196 32%

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 investments will experience the largest change in its market value as a result of changes in the level of interest rates (we are talking about the absolute value of the change, up or down)? Suppose interest rates go up or down by 50 basis points (0.5%). Rank the investments from 1 to 4 where a 1 is the most affected (largest absolute change in value) while a 4 is the least affected (smallest absolute change in value). A: $1 million invested in 3-month Treasury bills. 请选择~ B: $1 million invested in STRIPS (zero coupons) maturing in three years. |请选择 C: $1 million invested in a Treasury note maturing in three years. The note pays a 5% annual coupon. |请选择︾ D: $1 million invested in a Treasury note maturing in three years. The note pays a 10.0% annual coupon. |请选择

"The following table gives the rate of return for a certain mutual fund from 2010 to 2014: Year Rate of Return 2010 -5.9% 2011 11.4% 2012 1.4% 2013 12.7% 2014 6.5% Compute the overall rate of return during this period. Round your answer to the nearest tenth of a percent."
1. You are trying to plan your investments for the next year. You have decided that the market will either be strong (a bull market), weak (a bear market) or normal. You think that stocks, bonds, and bills will earn the following returns in these scenarios: Scenario Bull market Normal market Bear market Probability 0.20 0.55 0.25 Stock Return 0.25 0.10 -0.15 Bond Return 0.06 0.03 0.02 Bill Return 0.03 0.03 0.03 You have also decided that you have a risk-aversion (A) of 8. (a) What is the expected return for each of the securities? (b) What is the volatility of each security return? What is the covariance between stock and bond returns? (d) If you combine stocks and bills as an investment, what is your op- timal combination? What is your expected return? What is your portfolio's volatility? (e) If you combine bonds and bills, what is your optimal combination? What is your expected return? What is your portfolio's volatility? (f) If you combine stocks and bonds, what is your optimal…
A stock had a return of 6.8 percent last year. If the inflation rate was 1.2 percent, what was the approximate real return? (Enter your answer as a percent rounded to 1 decimal place.)
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Consider the performance of two securities, J and K over the five year period from 2000 to 2004. The annual return earned on each one of them is as provided in the table below: Year J K % % 2000 -30.0 6.4 2001 55.9 -21.1 2002 15.7 -10.0 2003 75.9 35.0 2004 5.7 15.6 Required: Compute the following: (i) The Arithmetic Mean returns of both securities over the 5-year holding period and the Geometric Mean return of both securities over the 5-year holding period. (ii) Assuming your organization had K100 million to invest on 01st January, 2000. If this was invested equally in the two securities, what terminal value would be accumulated after 5 years with annual compounding? (ii)What level of volatility would your investments be exposed to over the holding period for each security? and Evaluate the performance of the securities individually. With hindsight, which security would you have advised management to invest…
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