Use the following table: SeriesAverage return Large stocks11.76 % Small stocks16.46 Long-term corporate bonds6.23 Long-term government bonds6.10 U.S. Treasury bills3.83 Inflation3.10 a.Determine the return on a portfolio that was equally invested in large-company stocks and long-term corporate bonds. b.What was the return on a portfolio that was equally invested in small stocks and Treasury bills?

The return of portfolio can be calculated as expected return of the portfolio. The expected return…

Answered: Use the following table: Series…

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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Select all that are true with respect to historical data on risk and return in the U.S. financial markets since about 1926, Group of answer choices A portfolio of small stocks has earned higher returns than large stocks, with less risk A portfolio of small stocks has earned higher returns that large stocks, with higher risk Stocks have outperformed government bonds, albeit with higher risk With respect to a diversified stock portfolio, the longer the holding period, the higher the risk. With respect to a diversified stock portfolio, the longer the holding period, the lower the risk.
Use the data in the tables below to answer the following questions: Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2017. Average Premium Portfolio Treasury bills Treasury bonds Common stocks Average Annual Rate of Return (%) (Extra return versus Treasury bills) (%) 3.8 5.3 11.5 1.5 7.7 Standard deviation of returns, 1900-2017. Standard Portfolio Deviation (%) Treasury bills 2.9 Long-term government bonds 9.0 Common stocks 19.7 a. What was the average rate of return on large U.S. common stocks from 1900 to 2017? b. What was the average risk premium on large stocks? c. What was the standard deviation of returns on common stocks? (Enter your answer as a percent rounded to 1 decimal place.) a. Average rate of return 11.5 % b. Average risk premium 7.7 % C. Standard deviation of returns 19.7 %
Suppose interest rates on Treasury bonds rose from 5% to 9% as a result of higher interest rates in Europe. What effect would this have on the price of an average company's common stock? (Hint: in your explanation consider alternative investment to common stocks; a relatively riskless investment)
Which one of the following categories has the widest frequency distribution of returns for the period 1926-2014? Multiple Choice Small-company stocks U.S. Treasury bills Long-term government bonds Inflation Large-company stock
Using arithmetic means, what is the risk premium for small company stocks? What is the risk premium for longterm corporate bonds?
With reference to the information given above, Discuss the relationship between risk and return of the individual securities. Demonstrate the meaning and advantages of diversification by constructing a portfolio consisting of equal investments in the High-Tech Co. and the Counter- Cyclical Co. Explain your idea and show your work clearly. Perform calculations or quantitative analyses to support your answers where necessary.
Bhupatbhai
What is the beta of a portfolio comprised of the following securities? Stock Amount Invested Security Beta- 0.86 1.76 1.35 A B C $3600 $ 2800 $ 9000 Beta of portfolio to 2 decimal places is Numeric Response
8. A portfolio consists of bonds, stocks, commodities and real estates. The portfolio weightings, expected returns, variances and correlation matrix are shown below. Weight Expected Return Variance (%2) Bonds 50% 10% 15% 25% 8% 12% 20% 16% 10 30 15 20 0.1 0.3 0.4 0.6 1.0 0.2 1.0 Stocks Commodities Real Estate Correlation Matrix Bonds 1.0 -0.2 1.0 Stocks Commodities Real Estate Bonds Stocks Commodities Real Estate Calculate the standard deviation of the return of the portfolio.
Over the period of 1926-2014, which one of the following investment classes had the highest volatility of returns? Multiple Choice Large-company stocks U.S. Treasury bills Small-company stocks Long-term corporate bonds Long-term government bonds
From the information attached below, calculate: a. the average stock return from 20x1- 20x3. b. The standard deviation over the same period.
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% is incorrect)

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Series	Average return
Large stocks	11.76	%
Small stocks	16.46
Long-term corporate bonds	6.23
Long-term government bonds	6.10
U.S. Treasury bills	3.83
Inflation	3.10

a.	Determine the return on a portfolio that was equally invested in large-company stocks and long-term corporate bonds.
b.	What was the return on a portfolio that was equally invested in small stocks and Treasury bills?