What is the expected rate of return for asset

Reference no: EM132469604

Assignment - Accounting Questions

Question 1 - What was the average per-year arithmetic rate of return on short-term bills and cash from 1990 to 2016?

Question 2 - What was the average per-year arithmetic rate of return on long-term bonds from 1990 to 2016?

Question 3 - What was the average per-year standard deviation of the rate of return on short-term bills and cash from 1990 to 2016?

Question 4 - What was the average per-year arithmetic rate of return on the S&P 500 index from 1990 to 2016?

Question 5 - What was the average per-year standard deviation of the rate of return on the S&P 500 index from 1990 to 2016?

Question 6 - Asset A earns 7.8%, -1%, 1.2%, or -7% in states 1 through 4. Asset B earns 1.9%, 3.5%, 0.3%, or 7.2%.

Asset A	7.8%	-1%	1.2%	-7%
Asset B	1.9%	3.5%	0.3%	7.2%

What is the standard deviation for a portfolio AB that invests 88% in A and (1-88%) in B?

Question 7 - Consider two assets, A and B. A earns +4%, -5%, or +3%, in scenarios 1, 2, and 3. B earns -5%, +3%, or +4%, in scenarios 1, 2, and 3. Each scenario is equally likely. Compute the expected rates of return and SD for each asset, A and B. Now, consider a portfolio of assets A and B called AB, where the investor holds fraction 33% of his portfolio in A and fraction (1-33%) in B. Compute the standard deviation of AB. Compare the new standard deviation to that of each asset's individual standard deviation. What was the change in standard deviation between asset A and portfolio AB? StDev(AB) - StDev(A)

Question 8 - An asset has four possible rates of return, all equally likely: 18.2%, 18.4%, 15.2%, and 2.5%. What is the expected rate of return for this asset?

Question 9 - Do market correlation, market covariance, and market-beta always have the same sign?

Yes

No answer text provided.

Sometimes

Question 10 - Estimates predict that a project will return 12.4% if the market return is 10.1%, and will return 4.1% if the market return is 6.2%. Estimate the market beta.

Question 11 - Consider two assets, A and B in three equally likely scenarios. In scenario 1, they earn 4% and 10%, respectively. In scenario 2, they both earn 5%. In scenario 3, they earn 6% and 0%, respectively. Find the expected rates of return for assets A and B.

	S1	S2	S3
Asset A	4%	5%	6%
Asset B	10%	5%	0%

Which asset would a risk-averse investor, who cares only about expected return and risk and can choose only one or the other, prefer?

B is Preferred

A and B are the Same

A is Preferred

Question 12 - Asset A earns 3.2%, -8.3%, 1%, 1.2% in states 1 through 4. Asset F is risk-free and earns 2% for sure. What is the standard deviation for a portfolio AF that invests 44% in A and (1-44%) in F?

Question 13 - The risk-free market asset is currently trading at 1.8%, the expected rate of return on the market is 6%. If you held a portfolio of two equal-weighted assets, A and B, whose Corr(A,B) = -1, then what must be the rate of return on this portfolio?

Question 14 - Consider two assets, A and B, with the following equally likely rates of return: A will return either 3%, 6%, or 3.5%. B will return either 2.5%, 8%, or 7.5%.

Asset A	3.0%	6.0%	3.5%
Asset B	2.5%	8.0%	7.5%

Find the expected rates of return for assets A and B. Which asset would an investor, who cares only about expected return and risk and can choose only one or the other, prefer?

A is better

Equal

Not Clear

B is better

Question 15 - Estimates predict that a project will return 10.2% if the market return is 11%, and will return 3.1% if the market return is 8.4%. What is its market beta?

Reference no: EM132469604

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