Question
A) You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 8 percent, -12 percent, 22 percent, 35 percent, and 12
A)
You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 8 percent, -12 percent, 22 percent, 35 percent, and 12 percent. Suppose the average inflation rate over this period was 3.88 percent and the average T-bill rate over the period was 4.51 percent. What was the average real risk premium over this time period?
[Hint: Step 1: Calculate the average real rate of return for Crash-n-Burn Computer. Step 2: Calculate the average real rate of return for the T-bill. Step 3: Subtract (average real rate of return for Crash-n-Burn Computer) - (average real rate of return for the T-bill).
(Enter your answer as a percentage, omit the "%" sign in your response, and round your answer to 2 decimal places. For example, 0.12345 or 12.345% should be entered as 12.35)
B)
You own a portfolio that is 36 percent invested in Stock X, 22 percent invested in Stock Y, and the rest invested in stock Z. The expected returns on these three stocks are 11 percent, 21 percent, and 11 percent, respectively. What is the expected return on the portfolio?
(Enter your answer as a percentage, omit the "%" sign in your response, and round your answer to 2 decimal places. For example, 0.12345 or 12.345% should be entered as 12.35.)
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