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Show your work (use of formula, etc.) in solving the problem.
Provide your answer/solution in the answer space provided below.
Answer the question:
- Given the following historical returns, calculate the average return and the standard deviation:
|
Year |
Return |
|
1 |
14% |
|
2 |
10% |
|
3 |
15% |
|
4 |
11% |
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- Consider the following time series: a. Construct a time series plot. What type of pattern exists in the data? Is there an indication of a seasonal pattern? b. Use a multiple linear regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data: Qtr1 = 1 if quarter 1, 0 otherwise; Qtr2 = 1 if quarter 2, 0 otherwise; Qtr3 = 1 if quarter 3, 0 otherwise. c. Compute the quarterly forecasts for next year.Over the past 4 years an investment returned 0.1, -0.12, -0.08, and 0.13. What is the standard deviation of returns? (Note: input raw results with four decimal digits, NOT percentage results. For example, input 0.0102 NOT 1.02%)Calculate the standard deviation of the following returns. Year Return 1 0.25 2 0.16 3 0.01 4 0.07 5 -0.11
- Use the following information to compute the standard deviation of returns: Yearly Returns Year Return (%) 1 19 2 1 3 10 4 26 5 4 a. 12% b. 10.42% c. 0.87% d. 108.5%Returns for the Alcoff Company over the last 3 years are shown below. What's the standard deviation of the firm's returns? (Hint:This is a sample, not a complete population, so the sample standard deviation formula should be used. Year Return 2010 21.00% 2009 −12.50% 2008 38.40% Select the correct answer. A. 25.78% B. 25.87% C. 25.81% D. 25.84% E. 25.90%Suppose the returns on an asset are normally distributed. The historical average annual return for the asset was 5.7 percent and the standard deviation was 18.3 percent. a. What is the probability that your return on this asset will be less than –4.1 percent in a given year? Use the NORMDIST function in Excel® to answer this question. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What range of returns would you expect to see 95 percent of the time? (Enter your answers for the range from lowest to highest. A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c. What range of returns would you expect to see 99 percent of the time? (Enter your answers for the range from lowest to highest. A negative answer should be indicated by a minus sign. Do not round intermediate calculations…
- An investment scheme has outlined its returns for each of the last five years as being -5%, 13%, 23%, 4%, and 3%. What is the STANDARD DEVIATION of the above sample of returns for this investment opportunity?Which one of the following is defined as the average compound return earned per year over a multiyear period? Multiple Choice A Geometric average return B Variance of returns C Standard deviation of returns D Arithmetic average return E. Normal distribution of returnsWhich one of the following best describes an arithmetic average return? Multiple Choice A. Total return divided by N − 1, where N equals the number of individual returns B. Average compound return earned per year over a multiyear period C. Total compound return divided by the number of individual returns D. Return earned in an average year over a multiyear period E. Positive square root of the average compound return
- 1.) On a single chart, plot the value of $1 invested in each of the five indexes over time. I.e., for all ??, plot the cumulative return series for each index: ?????? = (1 + ?��1)(1 + ?��2)...(1 + ????) What patterns do you observe? (10 points) 2.) Plot a histogram of only the Global index returns. Does the distribution look normal? (5 points) 3.) Estimate the following for each of the indices. In calculating the statistics, “monthly” can be interpreted as “not annualized”. (30 points) a. Arithmetic average of monthly returns, and annualized arithmetic return using the APR method b. Geometric average of monthly returns, and annualized geometric return using the EAR method. Why does the geometric average differ from the arithmetic average? c. Standard deviation of monthly returns, and annualized standard deviation d. Sharpe Ratio of monthly returns, and annualized Sharpe Ratio e. Skewness of monthly returns f. Kurtosis of monthly returns g. 5% Value at Risk (VaR) of…Use the following information to compute the standard deviation of returns: Yearly Returns Year Return (%) 1 19 2 1 3 10 4 26 5 4uppose the average return on Asset A is 7.1 percent and the standard deviation is 8.3 percent, and the average return and standard deviation on Asset B are 4.2 percent and 3.6 percent, respectively. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel® to answer the following questions. a. What is the probability that in any given year, the return on Asset A will be greater than 12 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the probability that in any given year, the return on Asset B will be greater than 12 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. In a particular year, the return on Asset A was −4.38 percent. How likely is it that such a low return will recur at some point in the future? (Do not round…
