(b) Stocks for Fumbeshi and Mundashi have the following historical returns: Year Fumbeshi Mundashi 2010 -18% -14.5% 2011 33% 21.8% 2012 15% 30.5% 2013 -0.5% -7.6% 2015 27% 26.3% (i) What is the average return rate of return for each stock during the period 2010 through 2015? ( (ii) Assuming someone held a portfolio consisting of 50 percent of stocks Fumbeshi and 50 percent stocks of Mundashi, what would have been the realized return on the portfolio during this period? (iii) What is the standard deviation of each stock during the period 2010 through 2015?
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(b) Stocks for Fumbeshi and Mundashi have the following historical returns:
Year |
Fumbeshi |
Mundashi |
2010 |
-18% |
-14.5% |
2011 |
33% |
21.8% |
2012 |
15% |
30.5% |
2013 |
-0.5% |
-7.6% |
2015 |
27% |
26.3% |
(i) What is the average return
(ii) Assuming someone held a portfolio consisting of 50 percent of stocks Fumbeshi and 50 percent stocks of Mundashi, what would have been the realized return on the portfolio during this period?
(iii) What is the standard deviation of each stock during the period 2010 through 2015?
Step by step
Solved in 4 steps
- Assume these are the stock market and Treasury bill returns for a 5-year period: ITT Stock Market T-Bill Return Year Return (%) (%) 2013 33.70 0.13 2014 13.30 0.13 2015 -3.60 0.13 2016 14.70 0.08 2017 24.20 0.10 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. Required A Required B Required C What was the risk premium on common stock in each year? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Year Risk Premium 2013 % 2014 % 2015 % 2016 2017 %Assume these are the stock market and Treasury bill returns for a 5-year period: Stock Market T-Bill Return Return (%) (%) 0.14 Year 2013 34.20 2014 13.90 0.14 2015 -3.80 0.14 2016 14.80 0.09 2017 24.30 0.11 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. Required A Required B Required C 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.) Standard deviation %Assume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market Return (%) T-Bill Return (%) 2013 36.00 0.22 2014 15.40 0.22 2015 −5.20 0.22 2016 17.00 0.09 2017 26.00 0.11 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.)
- Stocks for Fumbeshi and Mundashi have the following historical returns: Year Fumbeshi Mundashi 2010 -18% -14.50% 2011 33% 21.80% 2012 15% 30.50% 2013 -0.50% -7.60% 2015 27% 26.30% (i) What is the average return rate of return for each stock during the period 2010 through 2015?(ii) Assuming someone held a portfolio consisting of 50 percent of stocks Fumbeshi and 50 percent stocks of Mundashi, what would have been the realized return on the portfolio during this period? (iii) What is the standard deviation of each stock during the period 2010 through 2015?Stocks A and B have the following historical returns: Stock A's Returns (24.25%) 18.50 38.67 14.33 39.13 Year 2015 2016 2017 2018 2019 Assume the risk-free rate during this time was 3.5%. What are the Sharpe ratios for Stocks A and B and the portfolio over this time period using their average returns? Answers: a) Sharpe ratio for Stock A b) Sharpe ratio for Stock B 0.5332 0.8839 c) Sharpe ratio for Portfolio AB Stock B's Returns 5.50% 26.73 48.25 (4.50) 43.86 Note: enter your answers with 4 decimal placesStocks A and B have the following historical returns: Year Stock A’s Returns Stock B’s Returns 2015 (24.25%) 5.50% 2016 18.50 26.73 2017 38.67 48.25 2018 14.33 (4.50) 2019 39.13 43.86 Assume the risk-free rate during this time was 3.5%. What are the Sharpe ratios for Stocks A and B and the portfolio over this time period using their average returns? Answers: a) Sharpe ratio for Stock A = b) Sharpe ratio for Stock B = c) Sharpe ratio for Portfolio AB =
- Assume these are the stock market and Treasury bill returns for a 5-year period: Stock Market T-Bill Year Return (%) Return (%) 2013 31.7 0.02 2014 10.9 0.02 2015 -1.6 0.02 2016 13.0 0.20 2017 21.3 0.80 Required: a. What was the risk premium on common stock in each year? (Negative values should be entered with a negative sign.) 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.) es Complete this question by entering your answers in the tabs below. Required A Required B Required C What was the risk premium on common stock in each vear? (Do not round intermediate calculations. Enter vour answers as e to searchAssume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market Return (%) T-Bill Return (%) 2016 13.0 0.2 2017 21.0 0.8 2018 -6.2 1.8 2019 29.8 2.1 2020 20.6 0.4 Required: What was the risk premium on common stock in each year? What was the average risk premium? What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.)-- expressed in % (NOTE: 11.31% is incorrect)Assume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market Return (%) T-Bill Return (%) 2016 13.0 0.2 2017 21.0 0.8 2018 -6.2 1.8 2019 29.8 2.1 2020 20.6 0.4 Required: What was the risk premium on common stock in each year? What was the average risk premium? What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.)
- Stocks A and B have the following historical returns: Year Stock A’s Returns, rA Stock B’s Returns, rB 2010 (18.00%) (14.50%) 2011 33.00 21.80 2012 15.00 30.50 2013 (0.50) (7.60) 2014 27.00 26.30 Calculate the average rate of return for each stock during the period 2010 through 2014. Assume that someone held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would the realized rate of return on the portfolio have been each year? What would the average return on the portfolio have been during this period? Calculate the standard deviation of returns for each stock and for the portfolio. Calculate the coefficient of variation for each stock and for the portfolio. Assuming you are a risk-averse investor, would you prefer to hold Stock A, Stock B, or the portfolio? Explain thoroughly why.You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: Year FA 2015 -22.00% -4.00% 2016 34.00 17.00 2017 29.00 -15.00 2018 -2.00 46.00 2019 30.00 25.00 a. Calculate the average rate of return for each stock during the S-year period. Do not round intermediate calculations. Round your answers to bvo decimal places. Stock A: 13.80 % Stock B: 13.80 % b. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Do not round intermediate calculations. Round your answers to two decimal places. Negative values, if any, should be indicated by a minus sign. Year Portfolio 2015 13 % 2016 25.50 % 2017 7 % 2018 22 % 2019 27.50 % Average return 13.80 % c. Calulate the standard deviation of…REALIZED RATES OF RETURN Stocks A and B have the following historical returns: Year Stock A's Returns, rA Stock B's Returns, rB 2013 (18.00%) (14.50%) 2014 33 21.8 2015 15 30.50. 2016 0.50 7.60 2017 27 26.30 a. Calculate the average rate of return for each stock during the period 2013 through 2017b. Assume that someone held a portfolio consisting of 50% of Stock A and 50% ofstock B. What would the realized rate of return on the portfolio have been eachyear? What would the average return on the portfolio have been during this period?c. Calculate the standard deviation of returns for each stock and for the portfolio.d. Calculate the coefficient of variation for each stock and for the portfolio.e. Assuming you are a risk-averse investor, would you prefer to hold Stock A, Stock B,or the portfolio? Why?