Reference no: EM133056925

1. What is the one-year real rate of return (in %) if you invested in a diversified portfolio of common stocks which produced a 11.45 % nominal return and the rate of inflation for the year was 7.25%?

2. What is the one-year percentage return on a stock (in nominal terms) which was purchased for $85.75, paid you a $9 dividend after one year, and you were then able to sell for $102.10?Please round your answer to the 2nd decimal place after converting into percent terms.

3. You are thinking about in a common stock with the following possible outcomes: Probability of Investment States Occurrence (Pi)Returns (ri)State 1: Economic boom 0.3070% State 2: Average Growth 0.4020% State 3: Economic decline 0.30-30% Calculate the expected rate of return (in %) and the standard deviation of returns (σ) for this investment. Once again, please round your answer to the 2nd decimal place after converting into percent terms.

4. You have researched market information which shows that over a long period of time common stocks offered an average annual return of 12.55%, long-term 30-year U.S. Treasury bonds offered an average annual return of 8.75%, and short-term U.S. Treasury bills offered an average annual return of 6.05%. Based on your research what was the average annual risk premium for common stocks over U.S. Treasury bills? Also, what was the average annual risk premium for common stocks over 30-year U.S. Treasury bonds