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EBK CORPORATE FINANCE
11th Edition
ISBN: 8220102798878
Author: Ross
Publisher: YUZU
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Question
Chapter 10, Problem 5QP
Summary Introduction
To determine: The total real
Introduction:
The term return refers to a profit or gain made on an investment that is usually expressed in terms of percentage or dollars. The percentage total return shows the overall performance and efficiency of the amount invested.
The real rate of return refers to an annual return earned from an investment. This is regulated for fluctuations in price as a result of inflation rate and other external effects.
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Students have asked these similar questions
Assume these are the stock market and Treasury bill returns for a 5-year period:
Stock Market T-Bill Return
(%)
0.02
0.02
0.02
0. 20
Return (%)
Year
2013
2014
2015
2016
2017
31.7
10.9
-1.6
13.0
21.3
0.80
Required:
a. What was the risk premium on common stock in each year? (Negative values should be entered with a negative sign.)
b. What was the average risk premium?
c. What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.)
Assume these are the stock market and Treasury bill returns for a 5-year period:
ITT
Stock Market T-Bill Return
Year
Return (%)
(%)
2013
33.70
0.13
2014
13.30
0.13
2015
-3.60
0.13
2016
14.70
0.08
2017
24.20
0.10
Required:
a. What was the risk premium on common stock in each year?
b. What was the average risk premium?
c. What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.)
Complete this question by entering your answers in the tabs below.
Required A
Required B
Required C
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
%
Intro
You've collected the following historical rates of return for
stocks A and B:
Year (t) FA,t FB,t
2016 0.02 0.01
2015 0.08 0.05
2014 0.17 0.07
Chapter 10 Solutions
EBK CORPORATE FINANCE
Ch. 10 - Investment Selection Given that RadNet was up by...Ch. 10 - Investment Selection Given that Transocean was...Ch. 10 - Risk and Return We have seen that over long...Ch. 10 - Prob. 4CQCh. 10 - Effects of inflation Look at Table 10.1 and Figure...Ch. 10 - Risk Premiums Is it possible for the risk premium...Ch. 10 - Prob. 7CQCh. 10 - Returns Two years ago, the Lake Minerals and Small...Ch. 10 - Prob. 9CQCh. 10 - Historical Returns The historical asset class...
Ch. 10 - Calculating Returns Suppose a stock had an initial...Ch. 10 - Calculating Yields In Problem 1, what was the...Ch. 10 - Calculating Returns Rework Problems 1 and 2...Ch. 10 - Prob. 4QPCh. 10 - Prob. 5QPCh. 10 - Bond Returns What is the historical real return on...Ch. 10 - Calculating Returns and Variability Using the...Ch. 10 - Risk Premiums Refer to Table 10.1 in the text and...Ch. 10 - Prob. 9QPCh. 10 - Prob. 10QPCh. 10 - Calculating Real Rates Given the information in...Ch. 10 - Holding Period Return A stock has had returns of...Ch. 10 - Prob. 13QPCh. 10 - Prob. 14QPCh. 10 - Calculating Returns You bought a stock three...Ch. 10 - Calculating Real Returns Refer to Table 10.1. What...Ch. 10 - Return Distributions Refer back to Table 10.2....Ch. 10 - Prob. 18QPCh. 10 - Calculating Returns and Variability You find a...Ch. 10 - Arithmetic and Geometric Returns A stock has had...Ch. 10 - Arithmetic and Geometric Returns A stock has had...Ch. 10 - Calculating Returns Refer to Table 10.1 in the...Ch. 10 - Prob. 23QPCh. 10 - Using Return Distributions Suppose the returns on...Ch. 10 - Using Return Distributions Assuming that the...Ch. 10 - Prob. 26QPCh. 10 - Using Probability Distributions Suppose the...Ch. 10 - Prob. 28QPCh. 10 - Prob. 1MCCh. 10 - Prob. 2MCCh. 10 - Assume you decide you should invest at least part...Ch. 10 - Prob. 4MCCh. 10 - A measure of risk-adjusted performance that is...Ch. 10 - What portfolio allocation would you choose? Why?...
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