Question: Retums earned over a given time period are called realized returns. Historical data on realized retums is often used to estimate future results. Analysts across
Retums earned over a given time period are called realized returns. Historical data on realized retums is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Blue Llama Mining Inc. (BLM): Five years of realized returns for BLM are given in the following table. Remember: 1. While BLM was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for BLM for 2014 to 2018 are: Given the preceding data, the average realized return on BL.M's stock is The preceding dato series represents historical returns is If investors expect the average realized retum from 2014 to 2018 on BLM's stock to continue into the future, its coefficient of variation (CV) will be
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