The following table shows the nominal returns on Brazilian stocks and the rate of inflation. Year Nominal Return (%) Inflation (%) 2012 0.3 6.3 2013 -16.0 6.4 2014 -14.0 6.9 2015 -41.9 11.2 2016 66.7 6.8 2017 27.4 3.4 a. What was the standard deviation of the market returns? (Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. Calculate the average real return. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places)

The following table shows the nominal returns on Brazilian stocks and the rate of inflation. Year Nominal Return (%) Inflation (%) 2012 0.3 6.3 2013 -16.0 6.4 2014 -14.0 6.9 2015 -41.9 11.2 2016 66.7 6.8 2017 27.4 3.4 a. What was the standard deviation of the market returns? (Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. Calculate the average real return. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places)

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter13: Direct Foreign Investment

Section: Chapter Questions

Problem 1IEE

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The following table shows the nominal returns on Brazilian stocks and the rate of inflation. Year Nominal Return (%) Inflation (%) 2012 0.3 7.1 2013 -13.0 7.2 2014 -11.0 7.7 2015 -42.7 12.0 2016 67.5 7.6 2017 28.2 4.2 Calculate the average real return. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places)
Assume these are the stock market and Treasury bill returns for a 5-year period in the attached image: A. What was the risk premium on common stock in each year? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Risk Premium 2013 % 2014 % 2015 % 2016 % 2017 % b. What was the average risk premium? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Suppose we have the following returns for large-company stocks and Treasury bills over a six-year period: Year Large-Company stocks US Treasury bills 1 3.95% 6.53% 2 14.13 4.38 3 19.07 4.25 4 −14.61 7.30 5 −32.10 4.94 6 37.32 6.14 a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation of the returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. What was the average risk premium over this period? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent…
During the period from 2011 through 2015 the annual returns on small U.S. stocks were -3.76 percent, 18.79 percent, 46.82 percent, 3.39 percent, and -3.40 percent, respectively.What would a $1 investment, made at the beginning of 2011, have been worth at the end of 2015? (Round answer to 3 decimal places, e.g. 52.750.) Value in 2015 $enter a dollar amount of the investment at the end of 2015 rounded to 3 decimal places What average annual return would have been earned on this investment? (Round answer to 2 decimal places, e.g. 52.75.) Average annual return enter the average annual return per year rounded to 2 decimal places percent per year.
Assume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market Return (%) T-Bill Return (%) 2016 13.0 0.2 2017 21.0 0.8 2018 -6.2 1.8 2019 29.8 2.1 2020 20.6 0.4 Required: What was the risk premium on common stock in each year? What was the average risk premium? What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.)
The annual returns of a stock and the risk-free interest rate are given as follows: Year 2010 2011 2012 2013 2014 Stock Return % 5% -9% 6% 15% Rf 2% 1% 2% 0.5% 1% Calculate the arithmetic average stock return. 7+5+-9+6+15= 17/5= 3.4 Calculate the geometric average stock return. G=[(1+7%)(1+5%)(1+-9%)(1+6%)(1+15%)]^1/5-1 = 1.246387^1/5-1=4.5% Calculate the standard deviation of stock returns (could be done by Excel). Calculate the risk premium of the stock. Calculate the standard deviation of the excess returns. Calculate the Sharpe ratio of the stock.
Assume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market Return (%) T-Bill Return (%) 2013 35.90 0.21 2014 15.20 0.21 2015 -5.10 0.21 2016 16.90 0.08 2017 25.90 0.10 a. What was the risk premium on common stock in each year? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Year Risk Premium 2013 % 2014 % 2015 % 2016 % 2017 % b. What was the average risk premium? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
You’ve observed the following returns on Barnett Corporation’s stock over the past five years: –25.5 percent, 14 percent, 31 percent, 2.5 percent, and 21.5 percent. The average inflation rate over this period was 3.25 percent and the average T-bill rate over the period was 4.3 percent.What was the average real risk-free rate over this time period? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Average real risk-free rate % What was the average real risk premium? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Average real risk premium %
Suppose that the Treasury bill rate is 9% rather than 6%, as we assumed in Table 12.1, and the expected return on the market is 11%. Use the betas in that table to answer the following questions. a. Recalculate the expected return on the stocks in Table 12.1. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) b. Suppose now that you continued to assume that the expected return on the market remained at 11%. Now, what would be the expected returns on each stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
The following return series comes from Global Financial Data. Year Large Stocks LT Gov Bonds US T-bills CPI (Rf asset) (inflation) 2017 21.83% 6.24% 0.80% 2.07% 2018 -5.28% -1.25% 1.81% 2.10% 2019 25.45% 3.35% 2.15% 1.10% 2020 18.16% 10.25% 4.50% 1.88% 2021 28.70% -1.54% 0.40% 7.00% 2022 -19.78% -8.55% 2.20% 6.50% Calculate the average real return earned on US T-bills. (Enter percentages as decimals and round to 4 decimals)
Use the following information on states of the economy and stock returns to calculate the standard deviation of returns. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) State of Economy Probability ofState of Economy Security Returnif State Occurs Recession 0.40 −4.50 % Normal 0.50 13.00 Boom 0.10 25.00
Over the past 4 years, large-company stocks and U.S. Treasury bills have produced the returns stated below. During this period, inflation averaged 1.5 percent. Given this information, the average real rate of return on large-company stocks was ___ percent as compared to _____ percent for Treasury bills. Year 1 Year 2 Year 3 Year 4 Return (Large Cap Stocks) 12% 9% 6% 3% Return (U.S. Tsy-bills) 4% 2% 1% 1% Group of answer choices 5.9; -0.5 6.5; -0.5 5.9; 0.5 6.5; 0.5 6.5; 0.0