If the variability of the returns on large-company stocks were to decrease over the long-term, you...
If the variability of the returns on large-company stocks were to decrease over the long-term, you would expect which one of the following to occur as a result?
Increase in the risk premium
Increase in the average long-term rate of return
Decrease in the 68 percent probability range of returns
Increase in the standard deviation
Increase in the geometric average rate of return
Homework Answers
Answer: The third option is correct.
Decrease in the 68 percent probability range of returns
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If the variability of the returns on large-company stocks were
to decrease over the long-term, you...
Average return Standard Deviation 12.1 % Series Large-company stocks Small-company stocks Long-term corporate bonds Long-term government...
Average return Standard Deviation 12.1 % Series Large-company stocks Small-company stocks Long-term corporate bonds Long-term government bonds Intermediate-term government bonds U.S. Treasury bills Inflation 19.8% 31.7 16.5 6.4 8.3 6.0 9.9 5.2 5.6 3.4 3.1 3.0 4.0 a. What range of returns would you expect to see 68 percent of the time for long-term corporate bonds? (A negative answer should be indicated by a minus sign. Enter your answers from lowest to highest. Do not round intermediate calculations and enter...
Suppose we have the following returns for large-company stocks and Treasury bills over a six year...
Suppose we have the following returns for large-company stocks and Treasury bills over a six year period: Year Large Company US Treasury Bill 6.59 3.97 1 2 14.34 4.42 19.23 4.29 7.32 4 -14.45 -31.94 5.28 5.38 6 37.47 a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Average returns Large company stocks T-bills b. Calculate the...
Suppose we have the following returns for large-company stocks and Treasury bills over a six-year period:...
Suppose we have the following returns for large-company stocks and Treasury bills over a six-year period: Year 1 2 3 Large Company US Treasury Bill 4.00% 4.62% 14.49 4.96 19.33 3.88 -14.35 7.00 -31.84 5.38 37.04 6.43 5 a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation of the returns for...
Saved Assume that the historical return on large-company stocks is a predictor of the future returns....
Saved Assume that the historical return on large-company stocks is a predictor of the future returns. What return would you estimate for large-company stocks over the next year? The next 10 years? 20 years? 40 years? Refer to Table 12.4 (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) 1 year 10 years 20 years 40 years TABLE 12.4 Geometric versus Arithmetic Average Returns: 1926-2016 Average Return Standard Deviation Geometric...
Consider the following table for a period of six years: Year Returns Large- U.S. Company Stocks...
Consider the following table for a period of six years: Year Returns Large- U.S. Company Stocks Treasury Bills - 16.39% 7.63% -26.98 8.16 37.57 6.21 24.27 6.77 - 7.84 5.62 6.91 8.15 Un a-1. Calculate the arithmetic average returns for large-company stocks and T-bills over this time period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. Calculate the standard deviation of the returns for large-company stocks and T-bills...
Consider the following table for a period of six years: Returns Year Large-Company Stocks U.S. Treasury Bills...
Consider the following table for a period of six years: Returns Year Large-Company Stocks U.S. Treasury Bills 1 –15.59 % 7.47 % 2 –26.74 8.08 3 37.41 6.05 4 24.11 5.97 5 –7.52 5.54 6 6.75 7.91 Calculate the arithmetic average returns for large-company stocks and T-bills over this time period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Arithmetic average returns Large-company stock % T-bills % Calculate...
Consider the following rates of return: US Large- Year Company Stocks 1 3.66 % 14.44 3...
Consider the following rates of return: US Large- Year Company Stocks 1 3.66 % 14.44 3 19.03 -14.65 -32.14 6 37.27 Treasury Bills 4.66 % 2.33 4.12 5.88 4.90 6.33 5 a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Average returns Large-company stocks T-bills b. Calculate the standard deviation of the returns for large-company stocks...
Consider the following rates of return: Year Large-Company Stocks US Treasury Bills 1 3.99 % 4.59...
Consider
the following rates of return: Year Large-Company Stocks US
Treasury Bills 1 3.99 % 4.59 % 2 14.16 4.94 3 19.25 3.86
4 –14.43 6.99
5 –31.92 5.30 6 37.49 6.20 a. Calculate the arithmetic average
returns for large-company stocks and T-bills over this period b.
Calculate the standard deviation of the returns for large-company
stocks and T-bills over this period. c. Calculate the observed risk
premium in each year for the large-company stocks versus the
T-bills. What was...
Consider the following table for different assets for 1926 through 2017. 8.3 Series Large-company stocks Small-company...
Consider the following table for different assets for 1926 through 2017. 8.3 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 Standard Deviation 12.1% 19.8% 16.5 31.7 6.4 6.0 5.2 5.6 3.4 3.0 9.9 3.1 40 a. What range of returns would you expect to see 68 percent of the time for large- company stocks? (A negative answer should be indicated by a minus sign. Enter your answers from...
Suppose the returns on long-term government bonds are normally distributed. Assume long-term government bonds have a...
Suppose the returns on long-term government bonds are normally distributed. Assume long-term government bonds have a mean return of 6 percent and a standard deviation of 9.6 percent. What is the probability that your return on these bonds will be less than −13.2 percent in a given year? Use the NORMDIST function in Excel® to answer this question. Probability % What range of returns would you expect to see 95 percent of the time? Expected range of returns ...
Average return Standard Deviation 12.1 % Series Large-company stocks Small-company stocks Long-term corporate bonds Long-term government bonds Intermediate-term government bonds U.S. Treasury bills Inflation 19.8% 31.7 16.5 6.4 8.3 6.0 9.9 5.2 5.6 3.4 3.1 3.0 4.0 a. What range of returns would you expect to see 68 percent of the time for long-term corporate bonds? (A negative answer should be indicated by a minus sign. Enter your answers from lowest to highest. Do not round intermediate calculations and enter...
Suppose we have the following returns for large-company stocks and Treasury bills over a six year period: Year Large Company US Treasury Bill 6.59 3.97 1 2 14.34 4.42 19.23 4.29 7.32 4 -14.45 -31.94 5.28 5.38 6 37.47 a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Average returns Large company stocks T-bills b. Calculate the...
Suppose we have the following returns for large-company stocks and Treasury bills over a six-year period: Year 1 2 3 Large Company US Treasury Bill 4.00% 4.62% 14.49 4.96 19.33 3.88 -14.35 7.00 -31.84 5.38 37.04 6.43 5 a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation of the returns for...
Saved Assume that the historical return on large-company stocks is a predictor of the future returns. What return would you estimate for large-company stocks over the next year? The next 10 years? 20 years? 40 years? Refer to Table 12.4 (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) 1 year 10 years 20 years 40 years TABLE 12.4 Geometric versus Arithmetic Average Returns: 1926-2016 Average Return Standard Deviation Geometric...
Consider the following table for a period of six years: Year Returns Large- U.S. Company Stocks Treasury Bills - 16.39% 7.63% -26.98 8.16 37.57 6.21 24.27 6.77 - 7.84 5.62 6.91 8.15 Un a-1. Calculate the arithmetic average returns for large-company stocks and T-bills over this time period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. Calculate the standard deviation of the returns for large-company stocks and T-bills...
Consider the following rates of return: US Large- Year Company Stocks 1 3.66 % 14.44 3 19.03 -14.65 -32.14 6 37.27 Treasury Bills 4.66 % 2.33 4.12 5.88 4.90 6.33 5 a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Average returns Large-company stocks T-bills b. Calculate the standard deviation of the returns for large-company stocks...
Consider
the following rates of return: Year Large-Company Stocks US
Treasury Bills 1 3.99 % 4.59 % 2 14.16 4.94 3 19.25 3.86
4 –14.43 6.99
5 –31.92 5.30 6 37.49 6.20 a. Calculate the arithmetic average
returns for large-company stocks and T-bills over this period b.
Calculate the standard deviation of the returns for large-company
stocks and T-bills over this period. c. Calculate the observed risk
premium in each year for the large-company stocks versus the
T-bills. What was...
Consider the following table for different assets for 1926 through 2017. 8.3 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 Standard Deviation 12.1% 19.8% 16.5 31.7 6.4 6.0 5.2 5.6 3.4 3.0 9.9 3.1 40 a. What range of returns would you expect to see 68 percent of the time for large- company stocks? (A negative answer should be indicated by a minus sign. Enter your answers from...
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