The following information is provided: average annual rate of return for common stocks is 8.0%, • average annual rate of return for corporate bonds is 5.0%, • the average annual rate of return for U.S. Treasury bills is 3.0%, • average GDP growth is 2% What is the average market risk premium? O 5.0% O 13% O 2% O 8% O 6.0%

The following information is provided: average annual rate of return for common stocks is 8.0%, • average annual rate of return for corporate bonds is 5.0%, • the average annual rate of return for U.S. Treasury bills is 3.0%, • average GDP growth is 2% What is the average market risk premium? O 5.0% O 13% O 2% O 8% O 6.0%

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

See similar textbooks

Similar questions

Consider the following information for a period of years: Arithmetic Mean Long-term government bonds 7.6% Long-term corporate bonds 7.7 Inflation 4.6 What is the real return on long-term government bonds? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. What is the real return on long-term corporate bonds? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
The inflation rate in the United States has averaged 3% a year since 1900. Use the data in the table below to answer the following question: Average rates of return on Treasury bills, government bonds, and common stocks, 1900–2020. Portfolio Average Annual Rate of Return (%) Average Premium (Extra return versus Treasury bills) (%) Treasury bills 3.7 Treasury bonds 5.4 1.7 Common stocks 11.5 7.8 What was the average real rate of return on Treasury bills, Treasury bonds, and common stocks in that period? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
Bhupatbhai
Given the following: the Prime is 8.1 %, the FED funds rate is 6.9%, 90 day T-Bills are yielding 5.2%, the average return on all stocks traded on the NYSE is 11.7%, what would be the nominal rate of return?
The rate of return on CBO government bonds during the past year is 6.0%. The inflation rate during the past year is 2.8%. The real risk free rate of return is Select one: O a. None of these O b. 1.0311 O c. 25% O d. 3.11% e. 1.25
Bhupatbhai
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 stocks
If the general inflation rate is estimated to be 7.4074% and a firms money cost of capital is 16% , how do I calculate the real cost of capital?
why the increases in bond price are larger than the decreases in terms of dollars for the same change (say, 1% change) in the market interest rate
Analysts at New Lenox Securities have reported that the annual interest rate being paid on 3-year bonds issued by the U.S. federal government is 3.3%. The annual rate being paid on 2-year federal government bonds is 3.1%, and the rate being paid on 1-year federal government bonds is 2.8%. Assume also that liquidity and maturity risk premiums are zero (as in the examples we worked). According to the Expectations Theory, what annual interest rate does the market expect the federal government to pay on a 1-year bond originating in year 3? In previous question 9 you were asked to compute a different but related "implied forward interest rate.") O A. 3.70% O B. 330% OC. 3.07% D. 3.40% E. 3.55%
According to the Financial Times, the below maturities and yield-to-maturities were observed for U.S. Treasury bills and notes: Bonds Bonds & rates overview Gov Yields Maturity Yield 1 Month 0.10% 3 Month 0.12% 6 Month 0.15% 2 Year 0.16% 5 Year 0.33% 10 Year 0.68% 30 Year 1.39% What is the shape of this yield curve? ○ Inverted. ● Steepening. Flattening. O Normal. Cannot be determined from question.
Historical stock returns show that small - company stocks produced an average return of 17.4 percent, inflation averaged 3.1 percent, U.S. Treasury bills returned an average 3.8 percent, and long - term corporate bonds returned 6.2 percent. What was the risk premium on small - company stocks for that period?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS