27. Last year, ABC stock returned 11.4 percent, the risk-free rate was 3.2 perce
ID: 2779745 • Letter: 2
Question
27. Last year, ABC stock returned 11.4 percent, the risk-free rate was 3.2 percent, and the inflation rate was 2.8 percent. What was the risk premium on ABC stock? A. 8.20 percent B. 8.43 percent C. 8.60 percent D. 8.88 percent E.8.97 percent 28. Over the past four years, a stock produced returns of 13, 6, -5, and 18 percent, respectively What is the standard deviation of these returns? A. 8.63 percent 8.9.93 percent C.9.97 percent D. 10.11 percent E. 10.15 percent 29.An asset has an average annual historical return of 11.6 percent and a standard deviation of 17.8 percent. What range of returns would you expect to see 95 percent of the time? A. -41.8 to +65.0 percent B.-34.4 to +53.6 percent C. -24.0 to +47.2 percent D. -6.2 to +29.4 percent E-5.4 to +41.0 percent 30. A stock has an average historical return of 11.3 percent and a standard deviation of 20.2 percent. Which range of returns would you expect to see approximately two-thirds of the time? A. -23.8 to +53.0 percent B. +4.6 to +33.8 percent C. +5.8 to +31.6 percent D. -3.9 to +32.5 percent E.-8.9 to +31.5 percent 31. Jeremy owns a stock that has historically returned 7.5 percent annually with a standard deviation of 10.2 percent. There is only a 0.5 percent chance that the stock will produce a return greater than percent in any one year.Explanation / Answer
Answer 27 is A.
Return = 11.4%
Risk-free rate = 3.2%
Risk Premium = Return - Risk-free rate
Risk Premium = 11.4% - 3.2%
Risk Premium = 8.2%
Answer 28 is C.
Returns are 13%, 6%, -5% and 18%
Average Return = (0.13 + 0.06 + (-0.05) + 0.18) / 4
Average Return = 0.08
Variance = [(0.13-0.08)^2 + (0.06-0.08)^2 + (-0.05-0.08)^2 + (0.18-0.08)^2] / 3
Variance = 0.0298 / 3
Variance = 0.009933
Standard Deviation = (0.009933)^(1/2)
Standard Deviation = 0.0997
Standard Deviation = 9.97%
Answer 29 is C.
Average Return = 11.6%
Standard Deviation = 17.8%
95% Interval = (Average Return - 2*Standard Deviation, Average Return + 2*Standard Deviation)
95% Interval = (11.6% - 2*17.8%, 11.6% + 2*17.8%)
95% Interval = (-24.0%, 47.2%)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.