7. Calculating Returns and Variability bon On long-term corporate bonds? Using the following returns, calculate the arithmetic average returns, the variances, and the standard deviations for X and Y. Returns Year Y 1 14% 41% -13 - 3 11 23 4 18 -13 42

Month    Zemin Corp.    Market1    5%    3%2    2%    1%3    -1%    1%4    -2%    -1%5    4%    4%6    3%    4% a.  Given the following​ holding-period returns, compute the average returns and the standard deviations for the Zemin Corporation and for the market. b.If​ Zemin's beta is 0.83 and the​ risk-free rate is 9 percent, what would be an expected return for an investor owning​ Zemin? ​ (Note: Because the preceding returns are based on monthly​ data, you will need to annualize the returns to make them comparable with the​ risk-free rate. For​ simplicity, you can convert from monthly to yearly returns by multiplying the average monthly returns by​ 12.) c.  How does​ Zemin's historical average return compare with the return you believe you should expect based on the capital asset pricing model and the​ firm's systematic​ risk?

A B с E F Investment Opportunity set for stocks and bonds with varios correlation coeffients SD s SDB 19 8 E(rs) 10 Weight in stocks WS -0.1 0.0 0.1 0.2 0.3 0.4 0.6 0.8 1.0 1.1 D E(TB) 5 Portfolio expected return ws(min) = (GB^2 - OBOSP) / (Os^2 + B^2 - 2*0BÚSP) E(rp) = ws(min) *E(rs)+(1-wg(min))*E(rb) = SDp = G -1 Portfolio Standard Deviation for Given Correlation 0 0.2 0.5 H Minimum Variance Portfolio 1

129 12 13 1 2 3 Examine the Year-to-Year Total Return Data in the table below Compute the annual Risk Premiums for Stocks and Bonds Compute the average returns for stocks, bonds, and bills. Compute the standard deviation of returns for stocks, bonds, and bills Graph the Distribution of Total Returns for Stocks, Bonds, and Bills Complete ALL cells in Yellow 4 5 6 7 8 9 10 11 Year to Year Total Returns Large Long Company Government T-Bills Stocks Bonds 14 15 16 17 18 19 A B D E G 3. Risk and Return Calculations for Stocks, Bonds, and Bills 20 21 22 3000 -1.89% 3001 -11.89% 3002 -22.10% 3003 38.68% 3004 10.88% 3005 14.91% 3006 5.80% 3007 15.49% 3008 -37.00% 3009 26.46% Average 24 Return X✓ fx Standard 25 Deviation 26 3.93% 21.58% 22.16% 5.98% 8.32% 5.33% 14.23% 4.61% 6.51% 4.03% 10.53% 3.43% 10.56% 4.30% 14.11% 3.97% 22.56% 21.78% 3.24% 5.52% -25.75% 3.15% 10.50% 4.36% F 13.31% 0.94% Risk Premiums Large Long Company Government Stocks Bonds 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% -10.00%…