During the 1927-2018 period the Sharpe ratio was greatest for which of the following asset classes? Multiple Choice Long-term U.S. Treasury bonds Small/growth U.S. stocks Bond world portfolio return in U.S. dollars Big/value U.S. stocks
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- The distribution of returns for which one of the following for the period of 1926-2006 produces the widest bell curve (or distribution)? O inflation. O long-term government bonds O large-company stocks O U.S. Treasury bills. small-company stocksConsider the following table for different assets for 1926 through 2020. Standard Deviation 19.7% Series Large-company stocks Small-company stocks Long-term corporate bonds Long-term government bonds Intermediate-term government bonds U.S. Treasury bills Inflation Average return 12.2% 16.2 6.5 6.1 5.3 3.3 2.9 Expected range of returns Expected range of returns a. What range of returns would you expect to see 68 percent of the time for large-company stocks? Note: A negative answer should be indicated by a minus sign. Enter your answers from lowest to highest. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. b. What about 95 percent of the time? 31.3 8.5 9.8 Note: A negative answer should be indicated by a minus sign. Enter your answers from lowest to highest. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. % to % to 5.6 3.1 4.0 % %Year U.S. Gov’t T-Bills U.K. Common Stocks 2015 0.063 0.150 2016 0.081 0.043 2017 0.076 0.374 2018 0.090 0.192 2019 0.085 0.106 a. Compute the geometric mean rate of return for each of these investments and compare the arithmetic mean return and geometric mean return for each investment and discuss the difference between mean returns as related to the standard deviation of each series.
- Which one of the following categories has the widest frequency distribution of returns for the period 1926-2014? Multiple Choice Small-company stocks U.S. Treasury bills Long-term government bonds Inflation Large-company stockOver the period of 1926-2014, which one of the following investment classes had the highest volatility of returns? Multiple Choice Large-company stocks U.S. Treasury bills Small-company stocks Long-term corporate bonds Long-term government bondsWhich one of the following had the lowest standard deviation for the period of 1926-2006? long-term government bonds inflation U.S. Treasury bill O large-company stocks O long-term corporate bonds
- Use the following table: Series Average return Large stocks 11.76 % Small stocks 16.46 Long-term corporate bonds 6.23 Long-term government bonds 6.10 U.S. Treasury bills 3.83 Inflation 3.10 a. Determine the return on a portfolio that was equally invested in large-company stocks and long-term corporate bonds. b. What was the return on a portfolio that was equally invested in small stocks and Treasury bills?The correlation coefficient between the returns on a broad index of U.S. stocks and the returns on indexes of the stocks of other industrialized countries is mostly _____, and the correlation coefficient between the returns on various diversified portfolios of U.S. stocks is mostly _____.a. less than .8; greater than .8.b. greater than .8; less than .8.c. less than 0; greater than 0.d. greater than 0; less than 0.Refer the table below on the average excess return of the U.S. equity market and the standard deviation of that excess return. Suppose that the U.S. market is your risky portfolio. Period 1927-2021 1927-1950 1951-1974 1975-1998 1999-2021 Average Annual Returns U.S. equity 12.17 10.26 10.21 17.97 10.16 U.S. Equity Market Standard Deviation 20.25 26.57 20.32 14.40 18.85 1-Month T- Excess return 8.87 9.33 6.62 10.99 8.50 Bills 3.30 0.93 3.59 6.98 1.66 Sharpe Ratio 0.44 0.35 0.33 0.76 0.45 Required: a. If your risk-aversion coefficient is A = 3.5 and you believe that the entire 1927-2021 period is representative of future expected performance, what fraction of your portfolio should be allocated to T-bills and what fraction to equity? Assume your utility function is U = E(r) - 0.5 × Ag². b. What if you believe that the 1975-1998 period is representative?
- Which one of the following is the most apt to have the largest risk premium in the future based on the historical record for 1926-2014? Multiple Choice U.S. Treasury bills Large-company stocks Long-term government debt Small-company stocks Long-term corporate debtRefer the table below on the average excess return of the U.S. equity market and the standard deviation of that excess return. Suppose that the U.S. market is your risky portfolio. Average Annual Returns U.S. Equity Market U.S. 1-Month Excess Standard Sharpe Period equity T-Bills return Deviation Ratio 1927-2021 12.17 3.30 8.87 20.25 0.44 1927-1950 10.26 0.93 9.33 26.57 0.35 1951-1974 10.21 3.59 6.62 20.32 0.33 1975-1998 1999-2021 17.97 6.98 10.99 14.40 0.76 10.16 1.66 8.50 18.85 0.45 Required: a. If your risk-aversion coefficient is A = 3.7 and you believe that the entire 1927-2021 period is representative of future expected performance, what fraction of your portfolio should be allocated to T-bills and what fraction to equity? Assume your utility function is UB-0.5× Ao 2 b. What if you believe that the 1975-1998 period is representative? Complete this question by entering your answers in the tabs below. Required A Required B If your risk-aversion coefficient is A = 3.7 and you…Assume these were the inflation rates and U.S. stock market and Treasury bill returns between 1929 and 1933: Year Inflation(%) Stock Market Return(%) T-Bill Return(%) 1929 0.5 –13.2 6.1 1930 –5.5 –30.7 2.9 1931 –9.3 –47.6 1.5 1932 –13.2 –8.2 0.8 1933 0.9 64.2 0.6 What was the real return on the stock market in each year? What was the average real return? What was the risk premium in each year? What was the average risk premium?