Question
4. Measuring standalone risk using realized data Returns earned over a given time period are called realized returns . Historical data on realized returns is
4. Measuring standalone risk using realized data
Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock.
Five years of realized returns for Happy Dog Soap Inc. (Happy Dog) are given in the following table:
2012 | 2013 | 2014 | 2015 | 2016 | |
---|---|---|---|---|---|
Stock return | 18.75% | 12.75% | 22.50% | 31.50% | 9.75% |
Also note that:
1. | While Happy Dog was started 40 years ago, its common stock has been publicly traded for the past 25 years. |
2. | The returns on Happy Dog's equity are calculated as arithmetic returns. |
Given this return data, the average realized return on Happy Dog Soap Inc.s stock is (47.63%, 19.05%, 38.10%, OR 59.06).
The preceding data series represents (the universe, a sample, OR the population?) of Happy Dogs historical returns. Based on this conclusion, the standard deviation of Happy Dogs historical returns is (7.6573%, 11.5576%, 8.5612%, OR 6.5921%)
If investors expect the average realized return on Happy Dog Soap Inc.s stock from 2012 to 2016 to continue into the future, its expected coefficient of variation (CV) is expected to equal (0.8314, 0.4494, 0.5168, OR .3775).
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started