Question
9. In 1980, the nominal annual interest rate was 13.4%, while the annual inflation rate was 12.4%. What was the real interest rate in 1980?
9.
In 1980, the nominal annual interest rate was 13.4%, while the annual inflation rate was 12.4%.
What was the real interest rate in 1980? Enter your answer in the following format: + or - 0.1234 Hint: Answer is between 0.0078 and 0.0096
11.
Suppose you have four stccks in your portfolio. The stock weights and their previous year returns are shown below.
| Stock | Weight | Rate of Return |
| IBM | 50% | 8.30% |
| Starbucks | 25% | 12.50% |
| Walmart | 25% | 4.70% |
| Ford | 0% | -13.50% |
How much is your portfolio's rate of return in the previous year? Enter your answer in the following format: 0.1234 Hint1: Portfolio return is the weighted return, i.e., w1*r1 + w2*r2 + w3*r3 + w4*r4 Hint2: Answer is between 0.0744 and 0.0946
12.
Researchers forecast the possible five economy states and their probabilities for the year 2023 as shown below. Also provided are the Stock return estimates in each of those five economic states.
| Economy State | Probability | Stock Returns |
| Big Recession | 0.20 | -27.0% |
| Mild Recession | 0.15 | -7.0% |
| Normal | 0.40 | 15.0% |
| Mild Boom | 0.15 | 30.0% |
| Mega Boom | 0.10 | 45.0% |
How much is the standard deviation of stock returns in the year 2023? Enter your answer in the following format: 0.1234 Hint: Answer is between 0.2050 and 0.2456
15.
Researchers forecast the possible five economy states and their probabilities for the year 2023 as shown below. Also provided are the Stock return estimates in each of those five economic states.
| Economy State | Probability | Stock Returns |
| Big Recession | 0.20 | -27.0% |
| Mild Recession | 0.15 | -7.0% |
| Normal | 0.40 | 15.0% |
| Mild Boom | 0.15 | 30.0% |
| Mega Boom | 0.10 | 45.0% |
How much is the Coefficient of Variation (CV) of stock returns in the year 2023? Enter your answer in the following format: 0.1234 Hint: Answer is between 2.3978 and 2.9248
16.
Annual returns of three stocks are given below. Two of them (Air America and Air Brazil) are airline stocks and one (Star Oil) is an oil stock. In general, when oil prices go up, airline company stocks go down and oil company stocks go up.
| YEAR | Air America | Air Brazil | Star Oil |
| 2016 | -28% | 9% | -2% |
| 2017 | 30% | -28% | -5% |
| 2018 | 7% | 7% | 9% |
| 2019 | -5% | -2% | -28% |
| 2020 | -2% | -5% | 30% |
| 2021 | 9% | 30% | 7% |
How much is the mean annual stock return? Notice that all three company stocks have the same annual return. Enter your answer in the following format: 0.1234 Hint: Answer is between 0.0169 and 0.0200
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Financial Management And Policy
Authors: James C. Van Horne
12th Edition
0130326577, 9780130326577
