Compute the arithmetic mean rate of return

Assignment Help Finance Basics
Reference no: EM132796047

The following are annual rates of return for U.S. government T-bills and U.K. commonstocks.

Year             U.S. Government T-Bills                U.K. Common Stock

2012                      0.063                                     0.150

2013                      0.081                                     0.043

2014                      0.076                                     0.374

2015                      0.090                                     0.192

2016                      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, their absolute risk, and their relative risk.

c. 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 the difference between mean returns as related to the standard deviation of each series

Reference no: EM132796047

Questions Cloud

What is discounted pay-back period : The cost of a project is Rs.50,000 and it generates cash inflows of Rs.20,000, Rs.15,000, Rs25,000 and Rs.10,000 in four years. Assuming a 10% rate of discount,
Prepare the journal entries for recording transaction : If on July 1, 2023, Barbara Co withdrew half the bonds with price of $ 2,130,000 plus accrued interest, prepare the journal entries for recording transaction
What amount should be reported as gain from sale : The policy is to take no amortization in the year of disposal. What amount should be reported as gain from sale of patent in 2025
What is the implied risk-free rate : The prices of European call and put options on a non-dividend-paying stock with 12 months to maturity, a strike price of $120, and an expiration date
Compute the arithmetic mean rate of return : The following are annual rates of return for U.S. government T-bills and U.K. commonstocks.
What amount of revenue should bmi recognize for the year : What amount of revenue should BMI recognize for the year under the revenue recognition criteria of the contract-based approach?
Calculate the point price elasticity of demand : A foreign aggressive company enters Jordan market. An existing Jordanian company that provides similar product has been forced to reduce the average price
What is the carrying value of the franchise : Flat can borrow at 14% for a loan of this type. What is the carrying value of the franchise to be reported on the December 31, 2021
Record the transactions for the month of march : Record the transactions for the month of March 2020 using a financial transaction worksheet. Use the following accounts: Cash; Accounts Receivable

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the firm cost of preferred stock

If the company were to sell a new preferred issue, it would incur a flotation cost of 5.00% of the issue price. What is the firm's cost of preferred stock?

  Method for becoming a small business owner

You are convinced that purchasing a franchise is your method for becoming a small business owner. You are presented with two possible franchise operations

  How much will be your retirement payment

What factor(s) can you change to reduce your annual deposit while improving your annual retirement benefit?

  Stock price and dividend policy

Good Values, Inc., is all-equity financed. The total market value of the firm currently is $100,000, and there are 2,000 shares outstanding. Ignore taxes. The firm has declared a $5 per share dividend. The stock will go ex-dividend tomorrow. At wh..

  How do you address the policy maker

How do you address the policy maker and convince her that the more likely action based on your analysis is for the adversary to conduct a cross-border attack?

  What annualized return is embedded in its anticipation

Assuming it is a seed-stage firm with no existing investors, what annualized return is embedded in its anticipation?  Suppose the founder wants to have a venture investor inject $15 million in three rounds of $5 million at times 0, 1, and 2 with a ti..

  What interest rate do you have to earn

Calculating Rates of Return. Use the "Return Rate" calculator at www. moneychimp.com to solve the following problem. You still want to buy the Lamborghini.

  London school of economics and business

Stock in the ABC Corporation was contributed to the London School of Economics and Business, a public school in the United Kingdom.

  What is the standard error of the estimate

Suppose we estimate the one-dat 95% VaR from 1,200 observations as 6 (in millions of dollars). By fitting a standard distribution to the observation

  Describe a financial intermediary

How would you describe a financial intermediary to someone who knows nothing about Finance?

  Demonstrate the strategic management process

Demonstrate the Strategic Management Process for an organization of your choice:

  Interpret the portfolio manager announcement

You have an investment of R750 000 in the fund. How do you interpret the portfolio manager's announcement?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd