PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 7, Problem 8PS
Standard deviation of returns The following table shows the nominal returns on Brazilian stocks and the rate of inflation.
- a. What was the standard deviation of the market returns? (Do not make the adjustment for degrees of freedom described in footnote 15.)
- b. Calculate the average real return.
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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
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)
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
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)
Chapter 7 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 7 - Rate of return The level of the Syldavia market...Ch. 7 - Real versus nominal returns The Costaguana stock...Ch. 7 - Arithmetic average and compound returns Integrated...Ch. 7 - Risk premiums Here are inflation rates and U.S....Ch. 7 - Risk Premium Suppose that in year 2030, investors...Ch. 7 - Stocks vs. bonds Each of the following statements...Ch. 7 - Expected return and standard deviation A game of...Ch. 7 - Standard deviation of returns The following table...Ch. 7 - Average returns and standard deviation During the...Ch. 7 - Prob. 10PS
Ch. 7 - Prob. 11PSCh. 7 - Diversification Here are the percentage returns on...Ch. 7 - Risk and diversification In which of the following...Ch. 7 - Prob. 14PSCh. 7 - Portfolio risk To calculate the variance of a...Ch. 7 - Portfolio risk a) How many variance terms and how...Ch. 7 - Portfolio risk Table 7.8 shows standard deviations...Ch. 7 - Portfolio risk Hyacinth Macaw invests 60% of her...Ch. 7 - Stock betas What is the beta of each of the stocks...Ch. 7 - Stock betas There are few, if any, real companies...Ch. 7 - Portfolio betas A portfolio contains equal...Ch. 7 - Portfolio betas Suppose the standard deviation of...Ch. 7 - Portfolio risk Here are some historical data on...Ch. 7 - Portfolio risk Suppose that Treasury bills offer a...
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