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Year Large-Company Stocks Long-Term Government Bonds U.S. Consumer Treasury Price Index Bills 1926 13.75% 5.69% 3.30% -1.12% |1927 35.70 6.58 3.15 -2.26 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 45.08 1.15 4.05 -1.16 -8.80 4.39 4.47 58 -25.13 4.47 2.27 -6.40 -43.60 -2.15 1.15 -9.32 -8.75 8.51 88 -10.27 52.95 1.92 52 76 -2.31 7.59 27 1.52 46.79 4.20 17 2.99 32.49 5.13 17 1.45 -35.45 1.44 27 2.86 31.63 4.21 .06 -2.78 -1.43 3.84 .04 .00 -10.36 5.70 .04 .71 -12.02 47 14 9.93 20.75 1.80 34 9.03 25.38 2.01 38 2.96 19.49 2.27 38 2.30 36.21 5.29 38 2.25 -8.42 54 38 18.13 5.05 -1.02 .62 8.84 4.99 2.66 1.06 2.99 17.81 4.58 112 -2.07 30.05 -98 1.22 5.93 23.79 -20 1.56 6.00 18.39 2.43 1.75 .75 -1.07 2.28 1.87 .75 52.23 3.08 .93 -.74 31.62 -.73 1.80 37 6.91 -1.72 2.66 2.99 -10.50 6.82 3.28 2.90 43.57 -1.72 171 1.76 12.01 -2.02 3.48 1.73 47 11.21 2.81 1.36 26.84 2.20 2.40 .67 -8.75 5.72 2.82 1.33 22.70 1.79 3.23 1.64 1964 1965 16.43 3.71 3.62 .97 12.38 93 4.06 1.92 1966 -10.06 5.12 4.94 3.46 1967 1968 1969 1970 23.98 -2.86 4.39 3.04 11.03 2.25 5.49 4.72 -8.43 -5.63 6.90 6.20 3.94 18.92 6.50 5.57 1971 1972 1973 14.30 11.24 4.36 3.27 18.99% 2.39% 4.23% 3.41% -14.69 3.30 7.29 8.71 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 -26.47 4.00 7.99 12.34 37.23 5.52 5.87 6.94 23.93 15.56 5.07 4.86 -7.16 38 5.45 6.70 6.57 -1.26 7.64 9.02 18.61 -2.76 10.56 13.29 32.50 -2.48 12.10 12.52 -4.92 4.04 14.60 8.92 21.55 44.28 10.94 3.83 22.56 1.29 8.99 3.79 6.27 15.29 9.90 3.95 31.73 32.27 7.71 3.80 18.67 22.39 6.09 1.10 5.25 -3.03 5.88 4.43 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 16.61 6.84 6.94 4.42 31.69 18.54 8.44 4.65 -3.10 7.74 7.69 6.11 30.46 19.36 5.43 3.06 7.62 7.34 3.48 2.90 10.08 13.06 3.03 2.75 1.32 -7.32 4.39 2.67 37.58 25.94 5.61 2.54 22.96 13 5.14 3.32 33.36 12.02 5.19 1.70 28.58 14.45 4.86 1.61 21.04 -7.51 4.80 2.68 2000 -9.10 17.22 5.98 3.39 |2001 2002 -11.89 5.51 3.33 1.55 -22.10 15.15 1.61 2.38 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 28.89 2.01 94 1.88 10.88 8.12 1.14 3.26 4.91 6.89 2.79 3.42 15.79 28 4.97 2.54 5.49 10.85 4.52 4.08 -37.00 41.78 124 .09 26.46 -25.61 15 2.72 15.06 7.73 14 1.50 2.11 35.75 .06 2.96 16.00 1.80 .08 1.74 32.39 -14.69 .05 1.50 13.69 24.74 .03 .75 1.41 -.64 .04 .74 11.98 1.76 21 2.11

Year Large-Company Stocks Long-Term Government Bonds U.S. Consumer Treasury Price Index Bills 1926 13.75% 5.69% 3.30% -1.12% |1927 35.70 6.58 3.15 -2.26 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 45.08 1.15 4.05 -1.16 -8.80 4.39 4.47 58 -25.13 4.47 2.27 -6.40 -43.60 -2.15 1.15 -9.32 -8.75 8.51 88 -10.27 52.95 1.92 52 76 -2.31 7.59 27 1.52 46.79 4.20 17 2.99 32.49 5.13 17 1.45 -35.45 1.44 27 2.86 31.63 4.21 .06 -2.78 -1.43 3.84 .04 .00 -10.36 5.70 .04 .71 -12.02 47 14 9.93 20.75 1.80 34 9.03 25.38 2.01 38 2.96 19.49 2.27 38 2.30 36.21 5.29 38 2.25 -8.42 54 38 18.13 5.05 -1.02 .62 8.84 4.99 2.66 1.06 2.99 17.81 4.58 112 -2.07 30.05 -98 1.22 5.93 23.79 -20 1.56 6.00 18.39 2.43 1.75 .75 -1.07 2.28 1.87 .75 52.23 3.08 .93 -.74 31.62 -.73 1.80 37 6.91 -1.72 2.66 2.99 -10.50 6.82 3.28 2.90 43.57 -1.72 171 1.76 12.01 -2.02 3.48 1.73 47 11.21 2.81 1.36 26.84 2.20 2.40 .67 -8.75 5.72 2.82 1.33 22.70 1.79 3.23 1.64 1964 1965 16.43 3.71 3.62 .97 12.38 93 4.06 1.92 1966 -10.06 5.12 4.94 3.46 1967 1968 1969 1970 23.98 -2.86 4.39 3.04 11.03 2.25 5.49 4.72 -8.43 -5.63 6.90 6.20 3.94 18.92 6.50 5.57 1971 1972 1973 14.30 11.24 4.36 3.27 18.99% 2.39% 4.23% 3.41% -14.69 3.30 7.29 8.71 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 -26.47 4.00 7.99 12.34 37.23 5.52 5.87 6.94 23.93 15.56 5.07 4.86 -7.16 38 5.45 6.70 6.57 -1.26 7.64 9.02 18.61 -2.76 10.56 13.29 32.50 -2.48 12.10 12.52 -4.92 4.04 14.60 8.92 21.55 44.28 10.94 3.83 22.56 1.29 8.99 3.79 6.27 15.29 9.90 3.95 31.73 32.27 7.71 3.80 18.67 22.39 6.09 1.10 5.25 -3.03 5.88 4.43 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 16.61 6.84 6.94 4.42 31.69 18.54 8.44 4.65 -3.10 7.74 7.69 6.11 30.46 19.36 5.43 3.06 7.62 7.34 3.48 2.90 10.08 13.06 3.03 2.75 1.32 -7.32 4.39 2.67 37.58 25.94 5.61 2.54 22.96 13 5.14 3.32 33.36 12.02 5.19 1.70 28.58 14.45 4.86 1.61 21.04 -7.51 4.80 2.68 2000 -9.10 17.22 5.98 3.39 |2001 2002 -11.89 5.51 3.33 1.55 -22.10 15.15 1.61 2.38 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 28.89 2.01 94 1.88 10.88 8.12 1.14 3.26 4.91 6.89 2.79 3.42 15.79 28 4.97 2.54 5.49 10.85 4.52 4.08 -37.00 41.78 124 .09 26.46 -25.61 15 2.72 15.06 7.73 14 1.50 2.11 35.75 .06 2.96 16.00 1.80 .08 1.74 32.39 -14.69 .05 1.50 13.69 24.74 .03 .75 1.41 -.64 .04 .74 11.98 1.76 21 2.11

EBK CFIN
EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter12: Capital Structure
Section: Chapter Questions
Problem 1PROB
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Based on Table 12.1 on page 392 answer the following questions:

A. Which were the three worst years for Large-Company stocks? What economic event was happening when the stock market was doing so poorly?

B. What were the best years for U.S. Treasury bills? What was happening in the economy that caused them to do so well?

C. When stocks go down, how do long-term government bonds typically do? Provide at least two years of data that support your position. 

Year Large-Company Stocks Long-Term Government Bonds U.S. Consumer Treasury Price Index Bills 1926 13.75% 5.69% 3.30% -1.12% |1927 35.70 6.58 3.15 -2.26 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 45.08 1.15 4.05 -1.16 -8.80 4.39 4.47 58 -25.13 4.47 2.27 -6.40 -43.60 -2.15 1.15 -9.32 -8.75 8.51 88 -10.27 52.95 1.92 52 76 -2.31 7.59 27 1.52 46.79 4.20 17 2.99 32.49 5.13 17 1.45 -35.45 1.44 27 2.86 31.63 4.21 .06 -2.78 -1.43 3.84 .04 .00 -10.36 5.70 .04 .71 -12.02 47 14 9.93 20.75 1.80 34 9.03 25.38 2.01 38 2.96 19.49 2.27 38 2.30 36.21 5.29 38 2.25 -8.42 54 38 18.13 5.05 -1.02 .62 8.84 4.99 2.66 1.06 2.99 17.81 4.58 112 -2.07 30.05 -98 1.22 5.93 23.79 -20 1.56 6.00 18.39 2.43 1.75 .75 -1.07 2.28 1.87 .75 52.23 3.08 .93 -.74 31.62 -.73 1.80 37 6.91 -1.72 2.66 2.99 -10.50 6.82 3.28 2.90 43.57 -1.72 171 1.76 12.01 -2.02 3.48 1.73 47 11.21 2.81 1.36 26.84 2.20 2.40 .67 -8.75 5.72 2.82 1.33 22.70 1.79 3.23 1.64 1964 1965 16.43 3.71 3.62 .97 12.38 93 4.06 1.92 1966 -10.06 5.12 4.94 3.46 1967 1968 1969 1970 23.98 -2.86 4.39 3.04 11.03 2.25 5.49 4.72 -8.43 -5.63 6.90 6.20 3.94 18.92 6.50 5.57
Transcribed Image Text:Year Large-Company Stocks Long-Term Government Bonds U.S. Consumer Treasury Price Index Bills 1926 13.75% 5.69% 3.30% -1.12% |1927 35.70 6.58 3.15 -2.26 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 45.08 1.15 4.05 -1.16 -8.80 4.39 4.47 58 -25.13 4.47 2.27 -6.40 -43.60 -2.15 1.15 -9.32 -8.75 8.51 88 -10.27 52.95 1.92 52 76 -2.31 7.59 27 1.52 46.79 4.20 17 2.99 32.49 5.13 17 1.45 -35.45 1.44 27 2.86 31.63 4.21 .06 -2.78 -1.43 3.84 .04 .00 -10.36 5.70 .04 .71 -12.02 47 14 9.93 20.75 1.80 34 9.03 25.38 2.01 38 2.96 19.49 2.27 38 2.30 36.21 5.29 38 2.25 -8.42 54 38 18.13 5.05 -1.02 .62 8.84 4.99 2.66 1.06 2.99 17.81 4.58 112 -2.07 30.05 -98 1.22 5.93 23.79 -20 1.56 6.00 18.39 2.43 1.75 .75 -1.07 2.28 1.87 .75 52.23 3.08 .93 -.74 31.62 -.73 1.80 37 6.91 -1.72 2.66 2.99 -10.50 6.82 3.28 2.90 43.57 -1.72 171 1.76 12.01 -2.02 3.48 1.73 47 11.21 2.81 1.36 26.84 2.20 2.40 .67 -8.75 5.72 2.82 1.33 22.70 1.79 3.23 1.64 1964 1965 16.43 3.71 3.62 .97 12.38 93 4.06 1.92 1966 -10.06 5.12 4.94 3.46 1967 1968 1969 1970 23.98 -2.86 4.39 3.04 11.03 2.25 5.49 4.72 -8.43 -5.63 6.90 6.20 3.94 18.92 6.50 5.57
1971 1972 1973 14.30 11.24 4.36 3.27 18.99% 2.39% 4.23% 3.41% -14.69 3.30 7.29 8.71 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 -26.47 4.00 7.99 12.34 37.23 5.52 5.87 6.94 23.93 15.56 5.07 4.86 -7.16 38 5.45 6.70 6.57 -1.26 7.64 9.02 18.61 -2.76 10.56 13.29 32.50 -2.48 12.10 12.52 -4.92 4.04 14.60 8.92 21.55 44.28 10.94 3.83 22.56 1.29 8.99 3.79 6.27 15.29 9.90 3.95 31.73 32.27 7.71 3.80 18.67 22.39 6.09 1.10 5.25 -3.03 5.88 4.43 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 16.61 6.84 6.94 4.42 31.69 18.54 8.44 4.65 -3.10 7.74 7.69 6.11 30.46 19.36 5.43 3.06 7.62 7.34 3.48 2.90 10.08 13.06 3.03 2.75 1.32 -7.32 4.39 2.67 37.58 25.94 5.61 2.54 22.96 13 5.14 3.32 33.36 12.02 5.19 1.70 28.58 14.45 4.86 1.61 21.04 -7.51 4.80 2.68 2000 -9.10 17.22 5.98 3.39 |2001 2002 -11.89 5.51 3.33 1.55 -22.10 15.15 1.61 2.38 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 28.89 2.01 94 1.88 10.88 8.12 1.14 3.26 4.91 6.89 2.79 3.42 15.79 28 4.97 2.54 5.49 10.85 4.52 4.08 -37.00 41.78 124 .09 26.46 -25.61 15 2.72 15.06 7.73 14 1.50 2.11 35.75 .06 2.96 16.00 1.80 .08 1.74 32.39 -14.69 .05 1.50 13.69 24.74 .03 .75 1.41 -.64 .04 .74 11.98 1.76 21 2.11
Transcribed Image Text:1971 1972 1973 14.30 11.24 4.36 3.27 18.99% 2.39% 4.23% 3.41% -14.69 3.30 7.29 8.71 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 -26.47 4.00 7.99 12.34 37.23 5.52 5.87 6.94 23.93 15.56 5.07 4.86 -7.16 38 5.45 6.70 6.57 -1.26 7.64 9.02 18.61 -2.76 10.56 13.29 32.50 -2.48 12.10 12.52 -4.92 4.04 14.60 8.92 21.55 44.28 10.94 3.83 22.56 1.29 8.99 3.79 6.27 15.29 9.90 3.95 31.73 32.27 7.71 3.80 18.67 22.39 6.09 1.10 5.25 -3.03 5.88 4.43 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 16.61 6.84 6.94 4.42 31.69 18.54 8.44 4.65 -3.10 7.74 7.69 6.11 30.46 19.36 5.43 3.06 7.62 7.34 3.48 2.90 10.08 13.06 3.03 2.75 1.32 -7.32 4.39 2.67 37.58 25.94 5.61 2.54 22.96 13 5.14 3.32 33.36 12.02 5.19 1.70 28.58 14.45 4.86 1.61 21.04 -7.51 4.80 2.68 2000 -9.10 17.22 5.98 3.39 |2001 2002 -11.89 5.51 3.33 1.55 -22.10 15.15 1.61 2.38 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 28.89 2.01 94 1.88 10.88 8.12 1.14 3.26 4.91 6.89 2.79 3.42 15.79 28 4.97 2.54 5.49 10.85 4.52 4.08 -37.00 41.78 124 .09 26.46 -25.61 15 2.72 15.06 7.73 14 1.50 2.11 35.75 .06 2.96 16.00 1.80 .08 1.74 32.39 -14.69 .05 1.50 13.69 24.74 .03 .75 1.41 -.64 .04 .74 11.98 1.76 21 2.11
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