Use the following table: Series Average return Large stocks 11.76 % Small stocks 16.46 Long-term corporate bonds 6.23 Long-term government bonds 6.10 U.S. Treasury bills 3.83 Inflation 3.10 a. Determine the return on a portfolio that was equally invested in large-company stocks and long-term corporate bonds. b. What was the return on a portfolio that was equally invested in small stocks and Treasury bills?
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| Use the following table: |
|
Series |
Average return |
|
| Large stocks | 11.76 | % |
| Small stocks | 16.46 | |
| Long-term corporate bonds | 6.23 | |
| Long-term government bonds | 6.10 | |
| U.S. Treasury bills | 3.83 | |
| Inflation | 3.10 | |
| a. |
Determine the return on a portfolio that was equally invested in large-company stocks and long-term corporate bonds. |
| b. | What was the return on a portfolio that was equally invested in small stocks and Treasury bills? |
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- Use the data in the tables below to answer the following questions: Average rates of return on Treasury bills, government bonds, and common stocks, 1900–2020. Portfolio Average Annual Rate of Return (%) Average Premium (Extra return versus Treasury bills) (%) Treasury bills 3.7 Treasury bonds 5.4 1.7 Common stocks 11.5 7.8 Standard deviation of returns, 1900–2020. Portfolio Standard Deviation (%) Treasury bills 2.8 Long-term government bonds 8.9 Common stocks 19.5 What was the average rate of return on large U.S. common stocks from 1900 to 2020? What was the average risk premium on large stocks? What was the standard deviation of returns on common stocks? Note: Enter your answer as a percent rounded to 1 decimal place.Historical stock returns show that small - company stocks produced an average return of 17.4 percent, inflation averaged 3.1 percent, U.S. Treasury bills returned an average 3.8 percent, and long - term corporate bonds returned 6.2 percent. What was the risk premium on small - company stocks for that period?Assume that over the last several decades the total annual returns of large-company common stocks averaged 12.1% small company stocks averaged 16.5% long-term government bonds averaged 6% and us tbills averaged 3.4%. What was the average excess return earned by long-term government bonds and small company stocks respectively?
- 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 risk premium earned on large-company stocks using the approximate Fisher equation. (Enter percentages as decimals and round to 4 decimals)For the cost of equity (stock) is it better to use the current US Treasury bill rate or a longer-termgovernment bond rate as the risk-free rate of return?Does the rate you use as the risk-free rate have an impact on what market premium might beappropriate? Historically, large-company stocks have earned an average return of 12.1% per annum, while US Treasury bills and long-term government bonds have earned average returns of 3.5% and5.9% respectively.Over the period of 1926-2014, which one of the following investment classes had the highest volatility of returns? Multiple Choice Large-company stocks U.S. Treasury bills Small-company stocks Long-term corporate bonds Long-term government bonds
- 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; 0.0The attached file contains hypothetical data for working this problem. Goodman Corporation’s and Landry Incorporated’s stock prices and dividends, along with the Market Index, are shown in the file. Stock prices are reported for December 31 of each year, and dividends reflect those paid during the year. The market data are adjusted to include dividends. The risk-free rate on long-term Treasury bonds is 8.04%. Assume that the market risk premium is 6%. What is the expected return on the market? Now use the SML equation to calculate the two companies' required returns.Assume the average return on utility stocks was 8.9% over the past 40 years. �If the average return on Treasury bills was 3.8% over that period, what is the historical risk premium for utility stocks?
- Use the following tables to assess the worthiness of Verticon stock as an investment. Verticon Stock Data (Current and Historical) 3:45PM EDT Aug 16, 2011 Price 18.85 USD Change +0.64 (+3.51%) Mkt cap 147.1B Div/yield 0.20/4.24 Shares 8,012 Beta 0.70 Book/share 11.335 EPS 1.11 12/2010 12/2009 12/2008 (Millions of Dollars) Total Assets 195,014 195,949 111,148 Total Liabilities 107,201 122,935 53,592 Preferred Shareholders’ Equity 52 61 73 Common Shareholders’ Equity 87,761 72,953 57,483 Shares Outstanding 8,012 8,070 6746 Book/Share ? 9.040 8.521 Q1 (Mar ’11) 2010 Net profit margin 15.24% 12.24% Return on equity 11.60% 9.30% Which one in bold? One of the most important features of a stock is its book value. The book value per share of Verticon’s stock for the year 2010 was equal to (10.954, 13.693, 11.502). Looking at the (Market cap, EPS, change in price, beta value, ROE) ,…Consider the following scenario analysis: RATE OF RETURN Stocks &Bonds Scenario Probability Stocks Bonds Recession 0.20 −9% 21% Normal economy 0.70 22 9% Boom 0.10 25 5% a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? Yes or No b. Calculate the expected rate of return and standard deviation for each investment. (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.) Expected Rate of Return Standard Deviation Stocks % % Bonds % %Consider the following scenario analysis: Scenario Probability Stocks Bonds Recession 0.20 - 8% +17% Normal Economy 0.20 +12 + 9 Boom 0.60 +28 +7 Note: No need to enter currency symbol and comma and % just type numbers with nearest round off number and percentages (for example: 10000 or 10000.65=10001 or 10.65%=11) a. Calculate the expected rate of return Stock Bond b. Calculate standard deviation for each investment? Stock Bond c. Calculate Coefficient of Variation Stock Bond Consider a portfolio with weights of 0.60 in stocks and 0.40 in bonds. d. What is the rate of return on the portfolio? Portfolio e. What is the expected rate of return and standard deviation of the portfolio? Portfolio…
