Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- standard deviation of the stock's returns? 01 20. Arithmetic and Geometric Returns A stock has had returns of –26 percent, 12 percent, 34 percent, -8 percent, 27 percent, and 23 percent over the last six years. What are the arithmetic and geometric average returns for the stock?arrow_forwardA stock has the following prices at the end of each of the following 5 years. What is the geometric average return over the period? Year 20x1 20x2 20x3 20x4 20x5 b. 1.17% 4 c. 2.26% d. 1.94% Price $2.17 $2.19 $2.12 $2.51 $2.3 Finish reviewarrow_forwardConsider the following annual returns of Estee Lauder and Lowe’s Companies: EsteeLauder Lowe’s Companies Year 1 23.4 % −6.0 % Year 2 −26.0 16.1 Year 3 17.6 4.2 Year 4 49.9 48.0 Year 5 −16.8 −19.0 Compute each stock’s average return, standard deviation, and coefficient of variation. (Round your answers to 2 decimal places.) ESTEE LAUDER. LOWES COMPANY Average return. %. % Standard deviation % % Coefficient of variationarrow_forward
- Year Return The last four years of returns for a stock are as follows: 1 - 3.6% 2 27.6% 3 4 11.9% 4.1% a. What is the average annual return? b. What is the variance of the stock's returns? c. What is the standard deviation of the stock's returns?arrow_forwardTen annual returns are listed in the following table: (Click on the following icon o in order to copy its contents into a spreadsheet.) 19.9% 16.6% 18.0% -50.0% 43.3% 1.2% - 16.5% 45.6% 45.2% -3.0% a. What is the arithmetic average retum over the 10-year period? b. What is the geometric average return over the 10-year period? c. If you invested $100 at the beginning, how much would you have at the end? a. What is the arithmetic average return over the 10-year period? The arithmetic average return over the 10-year period is (Round to four decimal places.)arrow_forwardUse the table for the question(s) below. Consider the following realized annual returns: Index Stock A Year End Realized. Realized Return Return 23.6% 46.3% 24.7% 26.7% 30.5% 86.9% 9.0% 23.1% -2.0% 0.2% -17.3% -3.2% -24.3% -27.0% 32.2% 27.9% 4.4% -5.1% 7.4% -11.3% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Suppose that you want to use the 10-year historical average return on Stock A to forecast the expected future return on Stock A. The 95% confidence interval for your estimate of the expect return is closest to: O 6.5% to 26.3%. O-15.0% to 47.9%. -4.5% to 37.4%. 13.2% to 19.5%.arrow_forward
- Given the time series of historical stock returns below, what is the standard deviation? (Hint: theexpected return is 4%)Time Period 1 2 3 4 5return (%) 5% -7% 12% 13% -3% a. 7.585%b. 0.79%c. 8.888%d. 2.155%arrow_forwardProblem 3:Here are the annual returns for five different stocks. Determine the expected return and risk for a period of five years for each of the stocks. Problem 4:a. Find the coefficient of variation (CV) for each of the actions in problem 3.b. Explain which of the investments a risk averse investor would prefer and which a risk lover investor would prefer. Answer clearly and in detail. Show all the computations that led to the result.arrow_forwardGiven the following information, what is the standard deviation (in percent) of the returns on this stock? Carry intermediate calculations to at least five decimals. Answer to two decimals Probability of State State of Economy Rate of Return (%) of Economy Recession 15% -12.34 Normal 60% 14.14 Boom 25% 23.77arrow_forward
- Calculate the correlation coefficient (PAB) for the following situation: (Round intermediate calculations and the final answer to 4 decimal place, e.g. 0.2921.) State of the Probability of Expected return on Expected return on economy occurrence stock A in this state stock B in this state High growth 30% 39.5% 56.5% Moderate 25% 18.5% 26.5% Recession 45% -6.5% -16.5% Correlation coefficientarrow_forward22arrow_forwardReview the following market information: Current Stock Market Return 11.25% Current T-Bill Price $979.43 Historic T-Bill Average Return 2.80% Historic Stock Market Average Return 8.10% Stock Beta 1.23 What is the required return (rounded to two places)?arrow_forward
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