Reference no: EM13495444

1.Download the spreadsheet from MyFinanceLab containing the data for Figure 10.1.

a. Compute the average return for each of the assets from 1929 to 1940 (The Great Depression).

b. Compute the variance and standard deviation for each of the assets from 1929 to 1940.

c. Which asset was riskiest during the Great Depression? How does that fit with your intuition?

2.Using the data from Problem 15, repeat your analysis over the 1990s.

a. Which asset was riskiest?

b. Compare the standard deviations of the assets in the 1990s to their standard deviations in the Great Depression. Which had the greatest difference between the two periods?

c. If you only had information about the 1990s, what would you conclude about the relative risk of investing in small stocks?

3.What if the last two decades had been “normal”? Download the spreadsheet from MyFinanceLab containing the data for Figure 10.1.

a. Calculate the arithmetic average return on the S&P 500 from 1926 to 1989.

b. Assuming that the S&P 500 had simply continued to earn the average return from (a),calculate the amount that $100 invested at the end of 1925 would have grown to by the end of 2008.

c. Do the same for small stocks.