Compute arithmetic mean rate of return-standard deviation

Assignment Help Financial Management

Reference no: EM13927703

1. The following are annual rates of return for U.S. government T-bills and U.K. common stocks. Year U.S Government T-Bills U.K Government Common Stock 2003 0.063 0.150 2004 0.081 0.043 2005 0.071 0.374 2006 0.090 0.192 2007 0.085 0.106

a. Compute the arithmetic mean rate of return and standard deviation of rates of return for the two series.

b. Discuss these two alternative investments in terms of their arithmetic average rates of return and their risk.

Compute the geometric mean rate of return for each of these investments. Compare the arithmetic mean return and geometric mean return for each investment and discuss this difference between mean returns as related to the standard deviation of each series.

2. The following are monthly percentage price changes for four market indexes: Month DJIA S&P 500 Russell 2000 1 0.03 0.02 0.04 2 0.07 0.06 0.1 3 -0.02 -0.01 -0.4 4 0.01 0.03 0.03 5 0.05 0.04 0.11 6 -0.06 -0.04 -0.08 Compute the following:

a. Expected monthly rate of return for each series.

b. Standard deviation for each series.

c. Covariance between the rates of return for the following indexes: DJIA—S&P 500 S&P 500—Russell 2000

d. The correlation coefficients for the same two combinations in question c.

Reference no: EM13927703

Questions Cloud

Price-earnings ratios-long-term debt from the balance sheet : Find and/or calculate the following items for Kia Motors and 3M Corporation: Price -Earnings (P/E) ratios. Long-term debt from the balance sheet. Long term Debt to Equity (D/E) ratios. P/E denotes price per share/most recent annual earnings per share..

What is the value of safeco stock when the required return : Financial analysts forecast Safeco Corp.’s (SAF) growth rate for the future to be 7 percent. Safeco’s recent dividend was $1.10. What is the value of Safeco stock when the required return is 9 percent?

Calculate each stocks coefficiet of variation : Stock X has a 10% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected returns. Stock Y has a 12.5% expected return, a beta coefficient of 1.2 and a 25% standard deviation. The risk-free rate is 6%, and the market risk..

Each company would be a good place to invest money : Make a list of 10 products or services that you buy on a weekly or monthly basis and the companies that sell them. Offer your initial views on whether each company would be a good place to invest money?

Compute arithmetic mean rate of return-standard deviation : The following are annual rates of return for U.S. government T-bills and U.K. common stocks. Year U.S Government T-Bills U.K Government Common Stock 2003 0.063 0.150 2004 0.081 0.043 2005 0.071 0.374 2006 0.090 0.192 2007 0.085 0.106. Compute the ari..

Describe briefly the a-b-c approach to inventory control : Describe briefly the A-B-C approach to inventory control.

What circumstances would the amount of safety stock held : What circumstances would the amount of safety stock held be

Professional overview of a career of a financial analyst : Essay Question: what is your professional overview of a career of a Financial Analyst?

How can managers use the results of a-b-c classification : How can managers use the results of A-B-C classification?

User Account

All Pages