Historical risk and return relationships in capital markets

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Reference no: EM131058208

Question: I need some help in answering these questions::

The following information is available concerning the historical risk and return relationships in the U.S. capital markets: U.S. Capital Markets Total Annual Returns, 1990-2011

Investment category Arithmetic mean Geometric mean Standard Deviation of return

Common stock 10.28% 8.81% 16.9%

Treasury bills 3.54 3.49 3.2

Long-term government bonds 5.10 4.91 6.4

Long-term corporate bonds 5.95 5.65 9.6

Real estate 9.49 9.44 4.5

ªBased on arithmetic mean.

(a) Explain why the Geometric mean and arithmetic mean are not equal and whether one or the other may be more useful for investment decision making.

(b) For the time period indicated, rank these investments on a relative basis using the coefficient of variation from the most to least desirable, Explain.

Calculate the range of returns that an investor would have expected to achieve 95 percent of the time from holding common stocks.

Can you help me?

Reference no: EM131058208

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