Look at Table. Compare the best and worst years for Tbills in terms of their nominal returns, and then compare the best and worst years in terms of real returns. Comment on what you find.
Answer to relevant QuestionsNotice in Figure that 1981 was the top year for nominal bill returns and 1982 was the top year for nominal bond returns. Why do you think that these two years saw such high returns on bonds and bills? The table below shows annual returns on the pharmaceutical leader Merck and chip maker Advanced Micro Devices. The last column of the table shows the annual return that a portfolio invested 50% in Merck and 50% in AMD would ...Contrast the historical approach to estimating expected returns with the probabilistic approach. Kevin Federline recently inherited $1 million and has decided to invest it. His portfolio consists of the following positions in several stocks. Calculate the portfolio weights to fill in the bottom row of the table. Erwin Enterprises has 10 million shares outstanding with a current market price of $10 per share. There is one investment available to Erwin, and its cash flows are provided below. Erwin has a cost of capital of 10 percent. ...
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