Historical Realized Rates of ReturnYou are considering an investment in either individual stocks or a portíolio of stocks. The two stocks you are researching, Stock A and Stock B, have the folloving historical retums:Year2015-22.00%-4.00%201634.0017.00201729.00-15.002018-2.0046.00201930.0025.00a. Calculate the average rate of return for each stock during the 5-year period. Do not round intermediate calculations. Round your ansvers to two decimal places.Stock A:Stock 8:b. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been theaverage return on the portfolio during this period? Do not round intermediate calculations. Round your ansviers to bwo decimal places. Negative values, if any, should be indicated by a minus sign.YearPortfolio20152016201720182019Average returnc. Calculate the standard deviation of returns for each stock and for the portfolio. Do not round intermediate calculations. Round your ansvwers to two decimal places.FAPortfolioStd. Dev.d. Suppose you are a risk-averse investor. Assuming Stocks A and B are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio? Why?A risk-averse investor should choose -Select- vsince it offers -Select- vexpected return with -Select- v risk.

Given Years = 2015, 2016, 2017, 2018, 2019 FA = -22.00% , 34.00 , 29.00, -2.00, 30.00 FB = -4.00%,…

ates of Return You are considering an investment in ether indvidual stocka or a porfolo of stocka. The bvo stoda you are researching. Stock A and Stock B, have the folloving historical retums: Year -22.00% 4.00% 2016 34.00 17.00 29.00 -15.00 2018 -2.00 46.00 30.00 25.00 a. Calulate the average rate of retum for each stock during the S-yar pariod. Do not round intermedate calculations. Round your anovers to bre decimal places. Stock A Stock e b. Suppose you had held a portfolo consisting of S04% of Stock A and 50% of Stock B. What would have been the realzed rate of return on the portfolo in each year? What would have been the average retum on the portfolo during this period? Do not round intermediate calculations. Round your ansvers to bio decimal places. Negative values, if any, should be indicated by a minus sign. Year Portfolio 2015 2016 2017 2018 2019 Average retum

ates of Return You are considering an investment in ether indvidual stocka or a porfolo of stocka. The bvo stoda you are researching. Stock A and Stock B, have the folloving historical retums: Year -22.00% 4.00% 2016 34.00 17.00 29.00 -15.00 2018 -2.00 46.00 30.00 25.00 a. Calulate the average rate of retum for each stock during the S-yar pariod. Do not round intermedate calculations. Round your anovers to bre decimal places. Stock A Stock e b. Suppose you had held a portfolo consisting of S04% of Stock A and 50% of Stock B. What would have been the realzed rate of return on the portfolo in each year? What would have been the average retum on the portfolo during this period? Do not round intermediate calculations. Round your ansvers to bio decimal places. Negative values, if any, should be indicated by a minus sign. Year Portfolio 2015 2016 2017 2018 2019 Average retum

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 13P

See similar textbooks

Similar questions

An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = 20.4, and di = 1.3, what is the stock’s predicted return?
Investment advisors estimated the stock market returns for four market segments: computers, financial, manufacturing, and pharmaceuticals. Annual return projections vary depending on whether the general economic conditions are improving, stable, or declining. The anticipated annual return percentages for each market segment under each economic condition are as follows: Assume that an individual investor wants to select one market segment for a new investment. A forecast shows improving to declining economic conditions with the following probabilities: improving (0.2), stable (0.5), and declining (0.3). What is the preferred market segment for the investor, and what is the expected return percentage? At a later date, a revised forecast shows a potential for an improvement in economic conditions. New probabilities are as follows: improving (0.4), stable (0.4), and declining (0.2). What is the preferred market segment for the investor based on these new probabilities? What is the expected return percentage?
What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Buy a stock for $30 a share, hold it for three years, and then sell it for $60 a share (the stock pays annual dividends of $2 a share). Buy a security for $40, hold it for two years, and then sell it for $100 (current income on this security is zero). Buy a one-year, 5 percent note for $1,000 (assume that the note has a $1,000 par value and that it will be held to maturity).
(1) Write out a formula that can be used to value any dividend-paying stock, regardless of its dividend pattern. (2) What is a constant growth stock? How are constant growth stocks valued? (3) What happens if a company has a constant gL that exceeds its rs? Will many stocks have expected growth greater than the required rate of return in the short run (i.e., for the next few years)? In the long run (i.e., forever)?
Market equity beta measures the covariability of a firms returns with all shares traded on the market (in excess of the risk-free interest rate). We refer to the degree of covariability as systematic risk. The market prices securities so that the expected returns should compensate the investor for the systematic risk of a particular stock. Stocks carrying a market equity beta of 1.20 should generate a higher return than stocks carrying a market equity beta of 0.90. Nonsystematic risk is any source of risk that does not affect the covariability of a firms returns with the market. Some writers refer to nonsystematic risk as firm-specific risk. Why is the characterization of nonsystematic risk as firm-specific risk a misnomer?
Use the extended DuPont equation to provide a breakdown of Computrons projected return on equity. How does the projection compare with the previous years and with the industrys DuPont equation?
Stocks C and F have the following historical returns: Year return (HPY) of C return (HPY) of F 2016 −18.00% −14.50% 2017 33.00% 21.80% 2018 15.00 % 30.50% 2019 −0.50% −7.60% 2020 27.00% 26.30% Required Calculate the geometric rate of return for each stock during the 5-year period. Calculate the standard deviation of returns for each stock. Calculate the coefficient of variation for each stock. If you are a risk-averse investor then, assuming these are your only choices, discuss whether you would prefer to hold Stock C or Stock F.
You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: Year 2015 -22.00 % -4.00 % 2016 34.00 17.00 2017 29.00 -15.00 2018 -2.00 46.00 2019 30.00 25.00 Calculate the average rate of return for each stock during the 5-year period. Do not round intermediate calculations. Round your answers to two decimal places. Stock A: % Stock B: % Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Do not round intermediate calculations. Round your answers to two decimal places. Negative values, if any, should be indicated by a minus sign. Year Portfolio 2015 % 2016 % 2017 % 2018 % 2019 % Average return %
You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: Year rA rB 2014 -20.00% -5.00% 2016 42.00 15.00 2017 20.00 -13.00 2018 -8.00 50.00 2019 25.00 12.00 a. Calculate the average rate of return for each stock during the 5-year period. b. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? c. Calculate the standard deviation of returns for each stock and for the portfolio. d. Suppose you are a risk-averse investor. Assuming Stocks A and B are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio? Why?
You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: Year r ̄A r ̄B 2014 -20.00% -5.00% 2016 42.00 15.00 2017 20.00 -13.00 2018 -8.00 50.00 2019 25.00 12.00 Calculate the average rate of return for each stock during the 5-year period. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Calculate the standard deviation of returns for each stock and for the portfolio. Suppose you are a risk-averse investor. Assuming Stocks A and B are your only choices, would you prefer to hold Stock A, Stock B,…
(Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Common Stock B Probability Return Probability Return0.20 10% 0.15 -4% 0.60 16% 0.35 7%0.20 21% 0.35 13% 0.15 20% a) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, what is the expected rate of return for stock A? What is the standard deviation? b. Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, what is the expected rate of return for stock B? What is the standard deviation? c. Based on the risk (as measured by the standard deviation) and return of each stock, which…