1. What is the one-year real rate of return (in %) if you invested in a diversified portfolio of common stocks which produced a 11.45
1. What is the one-year real rate of return (in %) if you invested in a diversified portfolio of common stocks which produced a 11.45 % nominal return and the rate of inflation for the year was 7.25%?
2. What is the one-year percentage return on a stock (in nominal terms) which was purchased for $85.75, paid you a $9 dividend after one year, and you were then able to sell for $102.10?Please round your answer to the 2nd decimal place after converting into percent terms.
3. You are thinking about in a common stock with the following possible outcomes: Probability of Investment States Occurrence (Pi)Returns (ri)State 1: Economic boom 0.3070% State 2: Average Growth 0.4020% State 3: Economic decline 0.30-30% Calculate the expected rate of return (in %) and the standard deviation of returns () for this investment. Once again, please round your answer to the 2nd decimal place after converting into percent terms.
4. You have researched market information which shows that over a long period of time common stocks offered an average annual return of 12.55%, long-term 30-year U.S. Treasury bonds offered an average annual return of 8.75%, and short-term U.S. Treasury bills offered an average annual return of 6.05%. Based on your research what was the average annual risk premium for common stocks over U.S. Treasury bills? Also, what was the average annual risk premium for common stocks over 30-year U.S. Treasury bonds
Step by Step Solution
There are 3 Steps involved in it
Step: 1
1 Oneyear real rate of return Nominal return 1145 Inflation rate 725 Real rate of return 1 Nominal r...See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started