10.

value: 8.33 points

Total Annual Returns, 19262008

Series	Arithmetic Mean		Standard Deviation
Small-company stocks	16.4	%	33.0	%
Large-company stocks	11.7		20.6
Long-term corporate bonds	6.2		8.4
Long-term government bonds	6.1		9.4
Intermediate-term government bonds	5.6		5.7
U.S. Treasury bills	3.8		3.1
Inflation	3.1		4.2

Required:

(a)

What range of returns would you expect to see 68 percent of the time for long-term corporate bonds? (Negative amount should be indicated by a minus sign. Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16). Input your answers from lowest to highest to receive credit for your answers.)

Expected range of returns

% to %

(b)	What about 95 percent of the time? (Negative amount should be indicated by a minus sign. Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16). Input your answers from lowest to highest to receive credit for your answers.)

Expected range of returns

% to %

11.

value: 8.33 points

A stock has had returns of 34 percent, 18 percent, 29 percent, ?6 percent, 16 percent, and ?48 percent over the last six years.

Required:

What are the arithmetic and geometric returns for the stock? (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16))

Arithmetic average return	%
Geometric average return	%

12.

value: 8.33 points

Suppose the returns on long-term government bonds are normally distributed. Based on the historical record from 1926-2008, long-term government bonds had a mean return of 6.1 percent and a standard deviation of 9.4 percent.

Required:

(a)	Based on the historical record, what is the approximate probability that your return on these bonds will be less than ?3.3 percent in a given year? (Do not include the percent sign (%).Round your answer to 2 decimal places. (e.g., 32.16))

Probability

%

(b)	What range of returns would you expect to see 95 percent of the time? (Do not include the percent signs (%). Negative amounts should be indicated by a minus sign. Input your answers from lowest to highest to receive credit for your answers. Round your answers to 2 decimal places. (e.g., 32.16))

Range of return

%

to

%

(c)	What range would you expect to see 99 percent of the time? (Do not include the percent signs (%). Negative amounts should be indicated by a minus sign.Input your answers from lowest to highest to receive credit for your answers. Round your answers to 2 decimal places. (e.g., 32.16))

Range of return

%

to

%