Required:Using Table 5.3 as your guide, what is your estimate of the expected annual HPR on the market index stock portfolio if the current risk-free interest rate is 5.4 % ? ( Round your answer to 2 decimal places.)Expected annual HPR% TABLE 5.3 Risk and return of investments in major asset classes, 1927-2018AverageRisk premiumStandard deviationmaxminT-bills3.38na3.1214.71-0.02T-bonds5.832.4511.5941.68-25.96Stocks11.728.3420.0557.35-44.04

Given: Variable in the question:Risk premium corresponding to stock= 8.34%Risk-free interest rate =…

TABLE 5.3 Risk and return of investments in major asset classes, 1927-2018 T-bills 3.38 Average Risk premium Standard deviation max min na 3.12 14.71 -0.02 T-bonds 5.83 2.45 11.59 41.68 -25.96 Stocks 11.72 8.34 20.05 57.35 -44.04

TABLE 5.3 Risk and return of investments in major asset classes, 1927-2018 T-bills 3.38 Average Risk premium Standard deviation max min na 3.12 14.71 -0.02 T-bonds 5.83 2.45 11.59 41.68 -25.96 Stocks 11.72 8.34 20.05 57.35 -44.04

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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Question

Required:
Using Table 5.3 as your guide, what is your estimate of the expected annual HPR on the market index stock portfolio if the current risk-
free interest rate is 5.4 % ? ( Round your answer to 2 decimal places.)
Expected annual HPR
%

TABLE 5.3 Risk and return of investments in major asset classes, 1927-2018
Average
Risk premium
Standard deviation
max
min
T-bills
3.38
na
3.12
14.71
-0.02
T-bonds
5.83
2.45
11.59
41.68
-25.96
Stocks
11.72
8.34
20.05
57.35
-44.04

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