FUND. OF CORPORATE FINANCE W/ACCESS >I
15th Edition
ISBN: 9781323510728
Author: Berk
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 11, Problem 10P
Download the spreadsheet from the book's Web the data for Figure 11.l.
a. Compute the average return for each of the assets from 1929 to 1940 (the Great
Depression).
b. Compute the variance and standard deviation for each of the assets from 1929 to
1940.
c. Which asset was riskiest during the Great Depression? How does that fit with your
intuition?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Given the data here,
Compute the average return for each of the assets from 1929 to 1940 (the Great Depression) (Round to five decimalplaces.)
Compute the variance and standard deviation for each of the assets from 1929 to 1940. (Round to five decimalplaces.)
Which asset was riskiest during the Great Depression? How does that fit with your intuition? (Round to five decimalplaces.)
Note: Notice that the answers for average return, variance and standard deviation must be entered in decimal format.
The data presented below represents the expected returns on a financial asset in different seasons of the year.
Season of year
Probability
Returns
Spring
40%
2%
Summer
35%
6%
Winter
25%
10%
What is the expected return on the asset?
ii) What is the standard deviation on the asset?
What is the covariance of the asset?
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%
Chapter 11 Solutions
FUND. OF CORPORATE FINANCE W/ACCESS >I
Ch. 11 - Prob. 1CCCh. 11 - Why do investors demand a higher return when...Ch. 11 - For what purpose do we use the average and...Ch. 11 - How does the standard deviation of historical...Ch. 11 - What is the relation between risk and return for...Ch. 11 - Prob. 6CCCh. 11 - Prob. 7CCCh. 11 - Prob. 8CCCh. 11 - Prob. 9CCCh. 11 - Does systematic or unsystematic risk require a...
Ch. 11 - What does the historical relation between...Ch. 11 - What are the components of a stock's realized...Ch. 11 - What is the intuition behind using the average...Ch. 11 - Prob. 4CTCh. 11 - How does the relationship between the average...Ch. 11 - Consider two local banks. Bank A has 100 loans...Ch. 11 - What is meant by diversification and how does it...Ch. 11 - Which of the following risks of a stock are likely...Ch. 11 - Prob. 9CTCh. 11 - Prob. 10CTCh. 11 - If you randomly select 10 stocks for a portfolio...Ch. 11 - Why doesn't the risk premium of a stock depend on...Ch. 11 - Prob. 13CTCh. 11 - DATA CASE Today is April 30, 2016, and you have...Ch. 11 - Convert these prices to monthly returns as the...Ch. 11 - Prob. 3DCCh. 11 - Prob. 4DCCh. 11 - Prob. 5DCCh. 11 - What do you notice about the average of the...Ch. 11 - Prob. 1PCh. 11 - Prob. 2PCh. 11 - Prob. 3PCh. 11 - Your portfolio consists of 100 shares of CSH and...Ch. 11 - You have just purchased a share of stock for $20....Ch. 11 - The following table contains prices and dividends...Ch. 11 - Prob. 7PCh. 11 - Prob. 8PCh. 11 - Use the data in SBUX_GOOG.xlsx on MFL to answer...Ch. 11 - Download the spreadsheet from the book's Web the...Ch. 11 - Prob. 11PCh. 11 - Prob. 12PCh. 11 - Prob. 13PCh. 11 - Consider the following five monthly returns: a....Ch. 11 - Explain the difference between the arithmetic...Ch. 11 - Prob. 16PCh. 11 - Prob. 17PCh. 11 - Prob. 18PCh. 11 - Prob. 19PCh. 11 - Prob. 20PCh. 11 - Prob. 21PCh. 11 - You are a risk-averse investor who is considering...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- An investor recorded the following annual returns of one of his investments. You are required to calculate and comment on; 1. Mean return. 2. Variance and standard deviation of the return. 3. Geometric return. Year 2016 2017 2018 2019 2020 Return 15% 17% 19% 10% -5%arrow_forwarda risk manager gathers the following sample data to analyze annual returns for an asset: 12%, 25% and -1%. he wants to compute the best unbiased estimator of the true population mean and standard deviation. the manager's estimate of the standard deviation for this asset should be closest to a. 0.0111 b. 0.0113 c. 0.1054 d. 0.1204.arrow_forwardConsider 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.arrow_forward
- Consider the following time series data: Compute MSE using the most recent value as the forecast for the next period. What is the forecast for month 8? Compute MSE using the average of all the data available as the forecast for the next period. What is the forecast for month 8? Which method appears to provide the better forecast?arrow_forwardRefer to the time series data in Problem 1. Using the average of all the historical data as a forecast for the next period, compute the following measures of forecast accuracy: a. Mean absolute error b. Mean squared error c. Mean absolute percentage error d. What is the forecast for week 7? 1. Consider the following time series data: Using the nave method (most recent value) as the forecast for the next week, compute the following measures of forecast accuracy: a. Mean absolute error b. Mean squared error c. Mean absolute percentage error d. What is the forecast for week 7?arrow_forwardConsider the following time series data: Using the naïve method (most recent value) as the forecast for the next week, compute the following measures of forecast accuracy: Mean absolute error Mean squared error Mean absolute percentage error What is the forecast for week 7?arrow_forward
- Problems 1 and 2 used different forecasting methods. Which method appears to provide the more accurate forecasts for the historical data? Explain. Consider the following time series data: Using the naïve method (most recent value) as the forecast for the next week, compute the following measures of forecast accuracy: Mean absolute error Mean squared error Mean absolute percentage error What is the forecast for week 7? Refer to the time series data in Problem 1. Using the average of all the historical data as a forecast for the next period, compute the following measures of forecast accuracy: Mean absolute error Mean squared error Mean absolute percentage error What is the forecast for week 7?arrow_forwardCalculating Returns and Standard Deviations Based on the following information, calculate the expected return andstandard deviation: State of Economy Probability of State of Economy Rate of Return if State Occurs Depression .15 -.148 Recession .30 .031 Normal .45 .162 Boom .10 .348arrow_forwarduppose 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…arrow_forward
- Suppose the average return on Asset A is 6.6 percent and the standard deviation is 8.6 percent and the average return and standard deviation on Asset B are 3.8 percent and 3.2 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 11 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 11 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 −4.25 percent. How likely is it that such a low return will recur at some point in the future? (Do…arrow_forwardUsing the data provided in the table below, construct the yield curves for August 1991, August 1992, and November 199arrow_forwardConsider the following time series data: a. Compute MSE using the most recent value as the forecast for the next period. Whatis the forecast for month 8?b. Compute MSE using the average of all the data available as the forecast for the nextperiod. What is the forecast for month 8?c. Which method appears to provide the better forecast?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Portfolio return, variance, standard deviation; Author: MyFinanceTeacher;https://www.youtube.com/watch?v=RWT0kx36vZE;License: Standard YouTube License, CC-BY