Question
1)Consider the following table for the total annual returns for a given period of time. Series Average return Standard Deviation Large-company stocks 11.7 % 20.6
1)Consider the following table for the total annual returns for a given period of time.
Series | Average return | Standard Deviation | ||
Large-company stocks | 11.7 | % | 20.6 | % |
Small-company stocks | 16.4 | 33.0 | ||
Long-term corporate bonds | 6.1 | 8.8 | ||
Long-term government bonds | 6.1 | 9.4 | ||
Intermediate-term government bonds | 5.6 | 5.7 | ||
U.S. Treasury bills | 3.8 | 3.1 | ||
Inflation | 3.1 | 4.2 |
What range of returns would you expect to see 95 percent of the time for long-term corporate bonds?(A negative answer should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Expected range of returns ...............% to................%
What about 99 percent of the time?(A negative answer should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Expected range of returns .............% to ................%
2)You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 1.12 and the total portfolio is equally as risky as the market. What must the beta be for the other stock in your portfolio?
3)A stock has an expected return of 11.8 percent, its beta is .93, and the risk-free rate is 5.9 percent. What must the expected return on the market be?
4)Stock Y has a beta of 1.50 and an expected return of 16.4 percent. Stock Z has a beta of .95 and an expected return of 12.6 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?
5)You have $100,000 to invest in either Stock D, Stock F, or a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 11.8 percent. Assume D has an expected return of 15.3 percent, F has an expected return of 11.2 percent, and the risk-free rate is 6.15 percent. If you invest $50,000 in Stock D, how much will you invest in Stock F?
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