You've observed the following returns on Bennington Corporation's stock over the past five years: 13 percent, -8 percent, 16 percent, 16 percent, and 10 percent. Suppose the average inflation rate over this period was 1.5 percent and the average T-bill rate over the period was 5 percent. a. What was the average real risk-free rate over this time period? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What was the average real risk premium? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Average real risk-free rate b. Average real risk premium % %

You've observed the following returns on Bennington Corporation's stock over the past five years: 13 percent, -8 percent, 16 percent, 16 percent, and 10 percent. Suppose the average inflation rate over this period was 1.5 percent and the average T-bill rate over the period was 5 percent. a. What was the average real risk-free rate over this time period? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What was the average real risk premium? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Average real risk-free rate b. Average real risk premium % %

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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You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 14 percent, –9 percent, 16 percent, 21 percent, and 3 percent. Suppose the average inflation rate over this period was 3.5 percent and the average T-bill rate over the period was 4.2 percent. a. What was the average real return on the company’s stock? b. What was the average nominal risk premium on the company’s stock?
You know that the stated rate of return is not what you really earned. If the inflation rate last year was 4.5%, and your investment had a stated rate of 18%, what was your real return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Real return %
Financial analysts forecast Safeco Corp.’s (SAF) growth rate for the future to be 10 percent. Safeco’s recent dividend was $1.55.What is the value of Safeco stock when the required return is 12 percent? (Round your answer to 2 decimal places.)
Assume the return on large-company stocks is currently 11.5 percent. The risk premium on large-company stocks is 8.6 percent and the inflation rate is 2.4 percent. What is the current risk-free rate of return
The average annual return on the S&P 500 Index from 1986 to 1995 was10.75 percent. The average annual T-bill yield during the same period was 3.85 percent. What was the market risk premium during these ten years? (Round your answer to 2 decimal places.) Average market risk premium %
Masukh
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.)
A security produced returns of 18 percent, 13 percent, -3 percent, 5 percent, and 8 percent over the past five years. Based on just these five years, what is the probability that this stock will lose more than 7.76 percent in any one given year? Select one: a. A. 0.5 percent b. B. 1.0 percent c. C. 2.5 percent d. E. 16.0 percent e. D. 5.0 percent
You’ve observed the following returns on Barnett Corporation’s stock over the past five years: –25.5 percent, 14 percent, 31 percent, 2.5 percent, and 21.5 percent. The average inflation rate over this period was 3.25 percent and the average T-bill rate over the period was 4.3 percent.What was the average real risk-free rate over this time period? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Average real risk-free rate % What was the average real risk premium? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Average real risk premium %
Assume that the 10-year U.S. Treasury is yielding 4.0 percent. Next year's earnings for the S&P 500 are expected to be $120. Use the Fed model to estimate the value of the S&P 500. Do not round intermediate calculations. Round your answer to two decimal places. If the S&P 500 is trading at 2,650, is the market overvalued or undervalued, and by how much? Do not round intermediate calculations. Round your answer to two decimal places. The market is -Select- -Select- overvalued undervalued ✓by %.
Am. 112.
$100 is invested at a nominal annual rate of 10% over 7 years. Calculate sum accrued (S) if interest is payable quarterly, b. What can you say about the stock returns distribution?

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