Fin 550 560 5. during the past five years, you owned two stocks that

  

fin 550 560

5. During the past five years, you owned two stocks that had the following annual rates of return:

Year Stock T Stock B

1 .19 .08

2 .08 .03

3 -.12 -.09

4 -.03 .02 

5 .15 .04

a. Compute the arithmetic mean annual rate of return for each stock. Which stock is most desirable by this measure?

b. Compute the standard deviation of the annual rate of return for each stock. (Use Chapter 1 Appendix if necessary.) By this measure, which is the preferable stock?

c. Compute the coefficient of variation for each stock. (Use the Chapter 1 Appendix if necessary.) By this relative measure of risk, which stock is preferable?

d. Compute the geometric mean rate of return for each stock. Discuss the difference between the arithmetic mean return and the geometric mean return for each stock. Discuss the differences in the mean returns relative to the standard deviation of the return for each stock.

7.7. A stockbroker calls you and suggests that you invest in the Lauren Computer Company. After analyzing the firm’s annual report and other material, you believe that the distribution of expected rates of return is as follows:

Lauren Computer Co.

Possible Rate of Return Probability

-.60 .05

-.30 .20 

-.10 .10

.20 .30

.40 .20

.80 .15

9. During the past year, you had a portfolio that contained U.S. government T-bills, long-term government bonds, and common stocks. The rates of return on each of them were as follows:

U.S. government T-bills 5.50%

U.S. government long-term bonds 7.50

U.S. common stocks 11.60

12. Assume that the consensus required rate of return on common stocks is 14 percent. In addition, you read in Fortune that the expected rate of inflation is 5 percent and the estimated long-term real growth rate of the economy is 3 percent. What interest rate would you expect on U.S. government T-bills? What is the approximate risk premium for common stocks implied by these data?

4. a. Someone in the 36 percent tax bracket can earn 9 percent annually on her investments in a tax-exempt IRA account. What will be the value of a one-time $10,000 investment in 5 years? 10 years? 20 years?

b. Suppose the preceding 9 percent return is taxable rather than tax-deferred and the taxes are paid annually. What will be the after-tax value of her $10,000 investment after 5, 10, and 20 years?

5. a. Someone in the 15 percent tax bracket can earn 10 percent on his investments in a tax-exempt IRA account. What will be the value of a $10,000 investment in 5 years? 10 years? 20 years?

b. Suppose the preceding 10 percent return is taxable rather than tax-deferred. What will be the after-tax value of his $10,000 investment after 5, 10, and 20 years?

6. Assume that the rate of inflation during all these periods was 3 percent a year. Compute the real value of the two tax-deferred portfolios in problems 4a and 5a.

Each homework assignment is required to be submitted in a single Excel file with each problem calculated on a separate worksheet within that file, clearly labeled with the question number. All formulas are required to be linked in the respective function ribbons for the purpose of authenticating calculations.

Paper Writing Center
Calculate your paper price
Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Professional and Experienced Academic Writers

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.

Essays

Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.

Admissions

Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.

Reviews

Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.

Reviews

Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.