CH 10 Last year, you purchased a stock at a price of $60.00 a share. Over the co
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Question
CH 10
Last year, you purchased a stock at a price of $60.00 a share. Over the course of the year, you received $2.90 in dividends and inflation averaged 3.4 percent. Today, you sold your shares for $65.60 a share. What is your approximate real rate of return on this investment?
17.6 percent
14.2 percent
12.7 percent
5.9 percent
10.8 percent
A stock had returns of 9 percent, –7 percent, 5 percent, and 14 percent over the past 4 years. What is the standard deviation of this stock for the past four years?
4.5 percent
A stock has returns of 7 percent, 13 percent, 25 percent, and 18 percent for the past 4 years. Based on this information, what is the 95 percent probability range for any one given year?
A stock had returns of 9 percent, –7 percent, 5 percent, and 14 percent over the past 4 years. What is the standard deviation of this stock for the past four years?
5.3 percent 15.5 percent 9.0 percent4.5 percent
A stock has returns of 7 percent, 13 percent, 25 percent, and 18 percent for the past 4 years. Based on this information, what is the 95 percent probability range for any one given year?
35.5 to 22.6 percent 74.2 to 80.7 percent 17.8 to 21.0 percent 35.5 to 42.0 percent 16.1 to 22.6 percentExplanation / Answer
1) Total dollar return = Dividend received + capital gain = 2.90 + (65.6-60) = 2.9+5.6 = 8.5
Nominal Return % = 8.5 / 60 = 14.2%
Real return = Nominal return - inflation = 14.2% - 3.4% = 10.8%
2) Enter the annual returns in an excel sheet and calculate standard deviation as following
=STDEV.S(A1:A4) = 9.0%
3) Enter the annual returns in an excel sheet and calculate mean and standard deviation as following
=AVERAGE(A1:A4) = 3.3%
=STDEV.S(A1:A4) = 19.4%
Range for 95% confidence interval can be calculated as Mean +- 2 * S.D
Lower limit = 3.3 % - 2*19.4% = -35.5%
Upper limit = 3.3 % + 2*19.4% = 42.0%
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