Average Returns: Average return is the simple mathematical average of a series of returns that has been generated over a particular time period. The average return can be computed similarly like a simple average for a definite set of numbers. The two common return measures are return on assets , ROA and return on equity , ROE. To determine: The types of investments that have had the highest average returns and have been the most volatile from year to year.

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Answer 1

Question

Chapter 11, Problem 1CC

Summary Introduction

Average Returns:

Average return is the simple mathematical average of a series of returns that has been generated over a particular time period. The average return can be computed similarly like a simple average for a definite set of numbers. The two common return measures are return on assets, ROA and return on equity, ROE.

To determine: The types of investments that have had the highest average returns and have been the most volatile from year to year.

Expert Solution & Answer

Answer to Problem 1CC

The small stock has the highest average rate of return and usually carries with it the most volatile rates. This implies that high return stocks have high amount of risk. There exists a strong relationship between return and risk in the direct proportion. The table below shows the risk-return profiles of various indices.

Yearly Average Returns
Year	Sensex	BSE 100	Small Cap
2003 − 2004	6.259178	0.29104439	0.351887811
2004 − 2005	6.056228	0.07470713	0.294252967
2005 − 2006	0.221075	0.21542737	0.236645801
2006 − 2007	0.078817	0.06110379	0.007770751
Mean	0.153825	0.1605707	0.222639332
Standard deviation	0.101281	0.1115031	0.15077397
Return : Risk	1.52 : 1	1.44 : 1	1.47 : 1

The above table shows the risk and relationship of small stocks. It can be concluded that all small stocks can generate high rate of return with high risk or volatility.

Explanation of Solution

Hence, small types of investments that have the highest average returns and are the most volatile from year to year.

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Answer 2

Question

Chapter 11, Problem 1CC

Summary Introduction

Average Returns:

Average return is the simple mathematical average of a series of returns that has been generated over a particular time period. The average return can be computed similarly like a simple average for a definite set of numbers. The two common return measures are return on assets, ROA and return on equity, ROE.

To determine: The types of investments that have had the highest average returns and have been the most volatile from year to year.

Expert Solution & Answer

Answer to Problem 1CC

The small stock has the highest average rate of return and usually carries with it the most volatile rates. This implies that high return stocks have high amount of risk. There exists a strong relationship between return and risk in the direct proportion. The table below shows the risk-return profiles of various indices.

Yearly Average Returns
Year	Sensex	BSE 100	Small Cap
2003 − 2004	6.259178	0.29104439	0.351887811
2004 − 2005	6.056228	0.07470713	0.294252967
2005 − 2006	0.221075	0.21542737	0.236645801
2006 − 2007	0.078817	0.06110379	0.007770751
Mean	0.153825	0.1605707	0.222639332
Standard deviation	0.101281	0.1115031	0.15077397
Return : Risk	1.52 : 1	1.44 : 1	1.47 : 1

The above table shows the risk and relationship of small stocks. It can be concluded that all small stocks can generate high rate of return with high risk or volatility.

Explanation of Solution

Hence, small types of investments that have the highest average returns and are the most volatile from year to year.

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Answer 3

Question

Chapter 11, Problem 1CC

Summary Introduction

Average Returns:

Average return is the simple mathematical average of a series of returns that has been generated over a particular time period. The average return can be computed similarly like a simple average for a definite set of numbers. The two common return measures are return on assets, ROA and return on equity, ROE.

To determine: The types of investments that have had the highest average returns and have been the most volatile from year to year.

Expert Solution & Answer

Answer to Problem 1CC

The small stock has the highest average rate of return and usually carries with it the most volatile rates. This implies that high return stocks have high amount of risk. There exists a strong relationship between return and risk in the direct proportion. The table below shows the risk-return profiles of various indices.

Yearly Average Returns
Year	Sensex	BSE 100	Small Cap
2003 − 2004	6.259178	0.29104439	0.351887811
2004 − 2005	6.056228	0.07470713	0.294252967
2005 − 2006	0.221075	0.21542737	0.236645801
2006 − 2007	0.078817	0.06110379	0.007770751
Mean	0.153825	0.1605707	0.222639332
Standard deviation	0.101281	0.1115031	0.15077397
Return : Risk	1.52 : 1	1.44 : 1	1.47 : 1

The above table shows the risk and relationship of small stocks. It can be concluded that all small stocks can generate high rate of return with high risk or volatility.

Explanation of Solution

Hence, small types of investments that have the highest average returns and are the most volatile from year to year.

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Answer 4

Question

Chapter 11, Problem 1CC

Summary Introduction

Average Returns:

Average return is the simple mathematical average of a series of returns that has been generated over a particular time period. The average return can be computed similarly like a simple average for a definite set of numbers. The two common return measures are return on assets, ROA and return on equity, ROE.

To determine: The types of investments that have had the highest average returns and have been the most volatile from year to year.

Expert Solution & Answer

Answer to Problem 1CC

The small stock has the highest average rate of return and usually carries with it the most volatile rates. This implies that high return stocks have high amount of risk. There exists a strong relationship between return and risk in the direct proportion. The table below shows the risk-return profiles of various indices.

Yearly Average Returns
Year	Sensex	BSE 100	Small Cap
2003 − 2004	6.259178	0.29104439	0.351887811
2004 − 2005	6.056228	0.07470713	0.294252967
2005 − 2006	0.221075	0.21542737	0.236645801
2006 − 2007	0.078817	0.06110379	0.007770751
Mean	0.153825	0.1605707	0.222639332
Standard deviation	0.101281	0.1115031	0.15077397
Return : Risk	1.52 : 1	1.44 : 1	1.47 : 1

The above table shows the risk and relationship of small stocks. It can be concluded that all small stocks can generate high rate of return with high risk or volatility.

Explanation of Solution

Hence, small types of investments that have the highest average returns and are the most volatile from year to year.

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Answer 5

Chapter 11, Problem 1CC

Summary Introduction

Average Returns:

Average return is the simple mathematical average of a series of returns that has been generated over a particular time period. The average return can be computed similarly like a simple average for a definite set of numbers. The two common return measures are return on assets, ROA and return on equity, ROE.

To determine: The types of investments that have had the highest average returns and have been the most volatile from year to year.

Expert Solution & Answer

Answer to Problem 1CC

The small stock has the highest average rate of return and usually carries with it the most volatile rates. This implies that high return stocks have high amount of risk. There exists a strong relationship between return and risk in the direct proportion. The table below shows the risk-return profiles of various indices.

Yearly Average Returns
Year	Sensex	BSE 100	Small Cap
2003 − 2004	6.259178	0.29104439	0.351887811
2004 − 2005	6.056228	0.07470713	0.294252967
2005 − 2006	0.221075	0.21542737	0.236645801
2006 − 2007	0.078817	0.06110379	0.007770751
Mean	0.153825	0.1605707	0.222639332
Standard deviation	0.101281	0.1115031	0.15077397
Return : Risk	1.52 : 1	1.44 : 1	1.47 : 1

The above table shows the risk and relationship of small stocks. It can be concluded that all small stocks can generate high rate of return with high risk or volatility.

Explanation of Solution

Hence, small types of investments that have the highest average returns and are the most volatile from year to year.

Answer 6

Chapter 11, Problem 1CC

Summary Introduction

Average Returns:

Average return is the simple mathematical average of a series of returns that has been generated over a particular time period. The average return can be computed similarly like a simple average for a definite set of numbers. The two common return measures are return on assets, ROA and return on equity, ROE.

To determine: The types of investments that have had the highest average returns and have been the most volatile from year to year.

Expert Solution & Answer

Answer to Problem 1CC

The small stock has the highest average rate of return and usually carries with it the most volatile rates. This implies that high return stocks have high amount of risk. There exists a strong relationship between return and risk in the direct proportion. The table below shows the risk-return profiles of various indices.

Yearly Average Returns
Year	Sensex	BSE 100	Small Cap
2003 − 2004	6.259178	0.29104439	0.351887811
2004 − 2005	6.056228	0.07470713	0.294252967
2005 − 2006	0.221075	0.21542737	0.236645801
2006 − 2007	0.078817	0.06110379	0.007770751
Mean	0.153825	0.1605707	0.222639332
Standard deviation	0.101281	0.1115031	0.15077397
Return : Risk	1.52 : 1	1.44 : 1	1.47 : 1

The above table shows the risk and relationship of small stocks. It can be concluded that all small stocks can generate high rate of return with high risk or volatility.

Explanation of Solution

Hence, small types of investments that have the highest average returns and are the most volatile from year to year.

Answer 7

Chapter 11, Problem 1CC

Summary Introduction

Average Returns:

Average return is the simple mathematical average of a series of returns that has been generated over a particular time period. The average return can be computed similarly like a simple average for a definite set of numbers. The two common return measures are return on assets, ROA and return on equity, ROE.

To determine: The types of investments that have had the highest average returns and have been the most volatile from year to year.

Answer 8

Expert Solution & Answer

Answer to Problem 1CC

The small stock has the highest average rate of return and usually carries with it the most volatile rates. This implies that high return stocks have high amount of risk. There exists a strong relationship between return and risk in the direct proportion. The table below shows the risk-return profiles of various indices.

Yearly Average Returns
Year	Sensex	BSE 100	Small Cap
2003 − 2004	6.259178	0.29104439	0.351887811
2004 − 2005	6.056228	0.07470713	0.294252967
2005 − 2006	0.221075	0.21542737	0.236645801
2006 − 2007	0.078817	0.06110379	0.007770751
Mean	0.153825	0.1605707	0.222639332
Standard deviation	0.101281	0.1115031	0.15077397
Return : Risk	1.52 : 1	1.44 : 1	1.47 : 1

The above table shows the risk and relationship of small stocks. It can be concluded that all small stocks can generate high rate of return with high risk or volatility.