The following table contains the historic returns from a portfolio consisting of large stocks and a...
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The following table contains the historic returns from a portfolio consisting of large stocks and a portfolio consisting of long-term Treasury bonds over the last 20 years. T-bills returns represent risk-free returns. Analyze the risk-return trade-off that would have characterized these portfolios. The following dataset is also available in Excel format in Module 3 Resources on Canvas. Returns in the dataset are in percents. For example, 31.33 means 31.33% per year. Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 <= Select Answer + Stocks H <= Select Answer + Bonds Large Stock 31.33 24.27 24.89 -10.82 -11.00 -21.28 31.76 11.89 6.17 15.37 5.50 -36.92 <= Select Answer Stock <= Select Answer Bond 29.15 17.80 1.01 16.07 35.18 11.37 -0.19 13.41 Long-Term T-Bonds 11.312 13.094 <= Select Answert Stock <= Select Answer H Bond -8.4734 14.4891 4.0302 14.6641 1.2778 5.1862 3.1030 2.2713 9.6431 17.6664 -5.8278 7.4457 16.6015 3.5862 -6.9025 10.1512 1.0665 0.7039 T-Bills 5.26 4.86 4.68 5.89 3.78 1.63 1.02 1.20 2.96 4.79 4.67 1.47 A. Estimate the annual risk premium of large stocks and T-bonds, respectively. (Round your answers to 2 decimal places.) 0.10 0.12 0.04 0.06 0.03 0.02 0.01 0.19 B. Estimate the annual volatility of large stocks and long-term T-bonds, respectively. (Round your answers to 2 decimal places.) C. Estimate the Sharpe ratio of large stocks and long-term T-bonds, respectively. (Round your answers to 2 decimal places.) D. Now assume that you have always invested half of your wealth in the stock and the other half in the T-bonds. Estimate the Sharpe ratio of your portfolio. (Round your answers to 2 decimal places.) <= Select Answer H Portfolio The following table contains the historic returns from a portfolio consisting of large stocks and a portfolio consisting of long-term Treasury bonds over the last 20 years. T-bills returns represent risk-free returns. Analyze the risk-return trade-off that would have characterized these portfolios. The following dataset is also available in Excel format in Module 3 Resources on Canvas. Returns in the dataset are in percents. For example, 31.33 means 31.33% per year. Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 <= Select Answer + Stocks H <= Select Answer + Bonds Large Stock 31.33 24.27 24.89 -10.82 -11.00 -21.28 31.76 11.89 6.17 15.37 5.50 -36.92 <= Select Answer Stock <= Select Answer Bond 29.15 17.80 1.01 16.07 35.18 11.37 -0.19 13.41 Long-Term T-Bonds 11.312 13.094 <= Select Answert Stock <= Select Answer H Bond -8.4734 14.4891 4.0302 14.6641 1.2778 5.1862 3.1030 2.2713 9.6431 17.6664 -5.8278 7.4457 16.6015 3.5862 -6.9025 10.1512 1.0665 0.7039 T-Bills 5.26 4.86 4.68 5.89 3.78 1.63 1.02 1.20 2.96 4.79 4.67 1.47 A. Estimate the annual risk premium of large stocks and T-bonds, respectively. (Round your answers to 2 decimal places.) 0.10 0.12 0.04 0.06 0.03 0.02 0.01 0.19 B. Estimate the annual volatility of large stocks and long-term T-bonds, respectively. (Round your answers to 2 decimal places.) C. Estimate the Sharpe ratio of large stocks and long-term T-bonds, respectively. (Round your answers to 2 decimal places.) D. Now assume that you have always invested half of your wealth in the stock and the other half in the T-bonds. Estimate the Sharpe ratio of your portfolio. (Round your answers to 2 decimal places.) <= Select Answer H Portfolio
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A Annual Risk Premium The risk premium is the difference between the average return of an investment ... View the full answer
Related Book For
Fundamentals of Investing
ISBN: 978-0133075359
12th edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
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