Question
The following table lists the stock prices for Microsoft from 1989 to 1998. The company did not pay any dividends during the period. Year 1989
The following table lists the stock prices for Microsoft from 1989 to 1998. The company did not pay any dividends during the period.
Year
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Price
$ 1.20 $ 2.09 $ 4.64 $ 5.34 $ 5.05 $ 7.64 $10.97 $20.66 $32.31 $69.34
a. Estimate the average annual return you would have made on your investment.
b. Estimate the standard deviation and variance in annual returns.
c. If you were investing in Microsoft today, would you expect the historical standard deviations and variances to continue to hold? Why or why not?
2. Unicom is a regulated utility serving northern Illinois. The following table lists
the stock prices and dividends on Unicom from 1989 to 1998.
Year Price
1989 $36.10
1990 $33.60
1991 $37.80
1992 $30.90
1993 $26.80
1994 $24.80
1995 $31.60
1996 $28.50
1997 $24.25
1998 $35.60
Dividends
$3.00 $3.00 $3.00 $2.30 $1.60 $1.60 $1.60 $1.60 $1.60 $1.60
a. Estimate the average annual return you would have made on your investment?
b. Estimate the standard deviation and variance in annual returns.
c. If you were investing in Unicom today, would you expect the historical standard deviations and variances to continue to hold? Why or why not?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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