Risk, Return and Portfolio Theory (Ch8)

Question 1

8-1 Estimate the income yield, capital gain (or loss), and total return for the flowing securities over the past year
a) A $1,000 par value, 6-percent bond that was purchased on year ago for $990 and is currently selling for $995.

Answer 1

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Question 2

8-1 Estimate the income yield, capital gain (or loss), and total return for the flowing securities over the past year

b) A stock that was purchased for $20, provided four quarterly dividends of $0.25each, and is currently worth $19.50

Answer 2

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Question 3

8-2: Calculate Arithmetic Mean and Geometric Mean
Estimate the arithmetic mean (AM) and geometric mean (GM ) for the following returns: 4.3%, 3.2%, 5.6%, 10.5%, -7.6%

AM =

GM =

Answer 3

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Question 4

8-3: Estimate the annual arithmetic mean return and the geometric mean return on an investment that is purchased for $100, rises to $110 after one year, and falls to $100 by the end of the second year. Assume the investment provided no income during the two-year period.

Answer 4

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Question 5

8-4: Estimating Expected Returns
Suppose you are given the following information for two stocks, A and B, where the return on each varies with the state of the economy

Answer 5

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