Pls show steps and also with concept and explanation 3. Measuring stand-alone risk using realized (historical) dataReturns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results.Analysts across companies use realized stock returns to estimate the risk of a stock.Consider the case of Blue Llama Mining Inc. (BLM):Five years of realized returns for BLM are given in the following table. Remember:1. While BLM was started 40 years ago, its common stock has been publicly traded for the past 25 years.2. The returns on its equity are calculated as arithmetic returns.3. The historical returns for BLM for 2014 to 2018 are:20142015 201620172018Stock return 6.25% 4.25% 7.50% 10.50% 3.25%Given the preceding data, the average realized return on BLM's stock isThe preceding data series representshistorical returns isof BLM's historical returns. Based on this conclusion, the standard deviation of BLM'sIf investors expect the average realized return from 2014 to 2018 on BLM's stock to continue into the future, its coefficient of variation (CV) will be

An investment's payoff denotes the value of cash flow that an investor generates from an investment…

Answered: 3. Measuring stand-alone risk using…

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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Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Falcon Freight Inc. (FF): Five years of realized returns for FF are given in the following table. Remember: 1. While FF was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for FF for 2014 to 2018 are: 2014 2015 2016 2017 2018 Stock return 25.00% 17.00% 30.00% 42.00% 13.00% Given the preceding data, the average realized return on FF’s stock is (63.50%, 25.40%, 50.80%, 78.74%) . The preceding data series represents (the population, a sample, the universe) of FF’s historical returns. Based on this conclusion, the standard deviation of FF’s historical…
Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Happy Dog Soap Inc. (HDS): Five years of realized returns for HDS are given in the following table. Remember: 1. While HDS was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for HDS for 2014 to 2018 are: 2014 2015 2016 2017 2018 Stock return 17.50% 11.90% 21.00% 29.40% 9.10% Given the preceding data, the average realized return on HDS's stock is The preceding data series represents historical returns is of HDS's historical returns. Based on this conclusion, the standard deviation of HDS's If investors expect the average realized return from 2014 to 2018 on HDS's stock to continue into the future, its…
Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Celestial Crane Cosmetics Inc. (CCC): Five years of realized returns for CCC are given in the following table. Remember: 1. While CCC was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for CCC for 2014 to 2018 are: Stock return 2014 2015 2016 2017 5.00% 3.40% 6.00% 8.40% 2018 2.60% Given the preceding data, the average realized return on CCC's stock is The preceding data series represents historical returns is of CCC's hist If investors expect the average realized return from 2014 to 2018 on C 15.75% 10.16% 5.08% 12.70% ns. Based on this conclusion, the standard deviation of CCC's o continue into the…
Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Happy Dog Soap Inc. (HDS): Five years of realized returns for HDS are given in the following table. Remember: 1. While HDS was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for HDS for 2014 to 2018 are: 2014 2015 2016 2017 2018 Stock return 17.50% 11.90% 21.00% 29.40% 9.10% Given the preceding data, the average realized return on HDS’s stock is   . The preceding data series represents   of HDS’s historical returns. Based on this conclusion, the standard deviation of HDS’s historical returns is   . If investors expect the average realized…
Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Five years of realized returns for Celestial Crane Cosmetics Inc. (Crane Cosmetics) are given in the following table: 2012 2013 2014 2015 2016 Stock return 23.75% 16.15% 28.50% 39.90% 12.35% Also note that: 1. While Crane Cosmetics was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on Crane Cosmetics's equity are calculated as arithmetic returns. Given this return data, the average realized return on Celestial Crane Cosmetics Inc.’s stock is   . The preceding data series represents   of Crane Cosmetics’s historical returns. Based on this conclusion, the standard deviation of Crane Cosmetics’s historical returns is   . If investors expect the…
Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Five years of realized returns for Falcon Freight Inc. (Falcon) are given in the following table: 2016 2017 2018 2019 2020 Stock return 25.00% 17.00% 30.00% 42.00% 13.00% Also note that: 1. While Falcon was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on Falcon's equity are calculated as arithmetic returns. Given this return data, the average realized return on Falcon Freight Inc.’s stock is   . The preceding data series represents a sample of Falcon’s historical returns. Based on this conclusion, the standard deviation of Falcon’s historical returns is   . If investors expect the average realized return on Falcon Freight Inc.’s stock from…
PLEASE SOLVE THIS QUESTION, ASAP: Q: Suppose a company estimates following one year returns from investing in the common stock of Leopard Corporation: Possibility of Occurrence .1 .25 .1 .15 .1 .2 .1 Possible returns 15% 30% 15% -10% -5% 20% 10% Required: Calculate Expected return & Risk {Standard Deviation)
One of the most important components of stock valuation is a firm's estimated growth rate. Financial statements provide the information needed to estimate the growth rate. Consider this case: Robert Gillman, an equity research analyst at Gillman Advisors, belleves in efficient markets. He has been following the mining industry for the past 10 years and needs to determine the constant growth rate that he should use while valuing Pan Asia Mining Co. Robert has the following information available: • Pan Asia Mining Co.'s stock (Ticker: PAMC) is trading at $21.25. • The company has forecasted net income and book value of equity for the coming year to be $1,341,300 and $10,497,500, respectively. • The company has also been paying dividends for the past eight years and has maintained a dividend payout ratio of 42.500000%. Based on this information, Robert's forecast of PAMC's growth rate in earnings and dividends should be: 8.15% 7.35% O 28.75% 27.16% Which of the following statements…
One of the most important components of stock valuation is a firm’s estimated growth rate. Financial statements provide the information needed to estimate the growth rate. Consider this case: Robert Gillman, an equity research analyst at Gillman Advisors, believes in efficient markets. He has been following the mining industry for the past 10 years and needs to determine the constant growth rate that he should use while valuing Pan Asia Mining Co. Robert has the following information available: • Pan Asia Mining Co.’s stock (Ticker: PAMC) is trading at $18.75. • The company’s stock is expected to pay a year-end dividend of $0.90 that is expected to grow at a certain rate. • The stock’s expected rate of return is 9.00%. Based on the information just given, what will be Robert’s forecast of PAMC’s growth rate? 3.49% 6.30% 8.95% 4.20% Which of the following statements accurately describes the relationship between earnings and…
One of the most important components of stock valuation is a firm’s estimated growth rate. Financial statements provide the information needed to estimate the growth rate. Consider this case: Robert Gillman, an equity research analyst at Gillman Advisors, believes in efficient markets. He has been following the mining industry for the past 10 years and needs to determine the constant growth rate that he should use while valuing Pan Asia Mining Co. Robert has the following information available: • Pan Asia Mining Co.’s stock (Ticker: PAMC) is trading at $15.00. • The company’s stock is expected to pay a year-end dividend of $0.72 that is expected to grow at a certain rate. • The stock’s expected rate of return is 7.20%. Based on the information just given, what will be Robert’s forecast of PAMC’s growth rate? 7.15% 1.99% 3.60% 2.40% Which of the following statements accurately describes the relationship between earnings and dividends when all other…
One of the most important components of stock valuation is a firm's estimated growth rate. Financial statements provide the information needed to estimate the growth rate. Consider this case: Robert Gillman, an equity research analyst at Gillman Advisors, believes in efficient markets. He has been following the mining industry for the past 10 years and needs to determine the constant-growth rate that he should use while valuing Pan Asia Mining Co. Robert has the following information available: Pan Asia Mining Co's stock (Ticker: PAMC) is trading at $15.00 The company's stock is expected to pay a year-end dividend of $0.72 that is expected to grow at a certain rate. The stock's expected rate of return is 7.20% Based on the information just given, what will be Robert's forecast of PAMC's growth rate? 3.60% 2.40% 7.15% 1.99% Which of the following statements accurately describes the relationship between earnings and dividends when all other factors are held constant? Dividend growth and…
(Solving a comprehensive problem) Use the end-of-year stock price data in the popup window,, to answer the following questions for the Harris and Pinwheel companies. a. Compute the annual rates of return for each time period and for both firms. b. Calculate both the arithmetic and the geometric mean rates of return for the entire three-year period using your annual rates of return from part a. (Note: you may assume that neither firm pays any dividends.) c. Compute a three-year rate of return spanning the entire period (i.e., using the ending price for period 1 and ending price for period 4). d. Since the rate of return calculated in part c is a three-year rate of return, convert it to an annual rate of return by using the following equation: 1 + Three-Year Rate of Return 1 + Annual Rate of Return 3 e. How is the annual rate of return calculated in part d related to the geometric rate of return? When you are evaluating the performance of an investment that has been held for several…

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