Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 7, Problem 10PS
a.
Summary Introduction
To compute: The real return of stock market in the every year.
b.
Summary Introduction
To compute: The arithmetic average real return.
c.
Summary Introduction
To compute: The risk premium for every year.
d.
Summary Introduction
To compute: The average risk premium.
e.
Summary Introduction
To compute: The standard deviation of the risk premium.
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Assume these are the stock market and Treasury bill returns for a 5-year period: Required: a. What was the risk premium on common stock in each year? b. What was the average risk premium? c. What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) Complete this question by entering your answers in the tabs below. What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
2) What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
3) What was the average risk premium? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Consider the following table for a period of six years:
Year
123456
Large-
Company
Stocks
- 16.09%
-26.89
37.51
24.21
7.72
6.85
Returns
U.S.
Treasury Bills
7.57%
8.13
6.15
6.47
5.59
8.06
Chapter 7 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 7 - Expected return and standard deviation A game of...Ch. 7 - Standard deviation of returns The following table...Ch. 7 - Average returns and standard deviation During the...Ch. 7 - Portfolio risk True or false? a. Investors prefer...Ch. 7 - Risk and diversification In which of the following...Ch. 7 - Portfolio risk To calculate the variance of a...Ch. 7 - Portfolio betas Suppose the standard deviation of...Ch. 7 - Portfolio betas A portfolio contains equal...Ch. 7 - Prob. 9PSCh. 7 - Prob. 10PS
Ch. 7 - Stocks vs. bonds Each of the following statements...Ch. 7 - Prob. 12PSCh. 7 - Prob. 13PSCh. 7 - Portfolio risk Hyacinth Macaw invests 60% of her...Ch. 7 - Portfolio risk a) How many variance terms and how...Ch. 7 - Portfolio risk Table 7.9 shows standard deviations...Ch. 7 - Portfolio risk Your eccentric Aunt Claudia has...Ch. 7 - Stock betas There are few, if any, real companies...Ch. 7 - Portfolio risk You can form a portfolio of two...Ch. 7 - Portfolio risk Here are some historical data on...Ch. 7 - Portfolio risk Suppose that Treasury bills offer a...Ch. 7 - Beta Calculate the beta of each of the stocks in...
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