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finance data bank

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Question;Use the table;for the question(s) below.;Consider the;following Price and Dividend data for J. P. Morgan Chase;Date;Price;($);Dividend;($);December 31, 2008;$40.06;February 9, 2009;$36.80;$0.50;May 7, 2009;$30.41;$0.50;August 10, 2009;$34.86;$0.50;November 8, 2009;$25.86;$0.50;December 30, 2009;$18.86;22) Assume that;you purchased J. P. Morgan Chase stock at the closing price on December 31;2008 and sold it at the closing price on December 30, 2009. Calculate your realized annual return is for;the year 2005.;Answer;Use the table;for the question(s) below.;Date;Price;($);Dividend;($);Return;(1;+ return);December 31, 2008;$40.06;0.00%;1;1;January 26, 2009;$36.80;$0.50;-6.89%;0.931103;0.931103;April 28, 2009;$30.41;$0.50;-16.01%;0.839946;0.782076;July 29, 2009;$34.86;$0.50;16.28%;1.162775;0.909379;October 28, 2009;$25.86;$0.50;-24.38%;0.756168;0.687643;December 30, 2009;$18.86;-27.07%;0.729312;0.501506;The Product of;(1 + returns) - 1 = -0.49849;Consider the;following realized annual returns;Year End;Market;Realized Return;Stock;B;Realized;Return;2000;21.2%;88.3%;2001;30.3%;56.4%;2002;22.3%;114.6%;2003;25.3%;68.4%;2004;-11.0%;-62.8%;2005;-11.3%;52.7%;2006;-20.8%;-22.0%;2007;33.1%;6.9%;2008;13.0%;9.2%;2009;7.3%;-0.9%;23) Suppose that;you want to use the 10 year historical average return on the Market to forecast;the expected future return on the Market.;Calculate the 95% confidence interval for your estimate of the expect;return.;24) Suppose that;you want to use the 10 year historical average return on Stock B to forecast;the expected future return on Stock B.;Calculate the 95% confidence interval for your estimate of the expect;return.;25) Using the;data provided in the table, calculate the average annual return, the variance;of the annual returns, and the standard deviation of the average returns for;the market from 2000 to 2009.;26) Using the;data provided in the table, calculate the average annual return, the variance;of the annual returns, and the standard deviation of the average returns for;Stock B from 2000 to 2009.;1) The excess;return if the difference between the average return on a security and the;average return for;A) Treasury;Bonds.;B) a portfolio;of securities with similar risk.;C) a broad based;market portfolio like the S&P 500 index.;D) Treasury;Bills.;2) Which of the;following statements is false?;A) Expected;return should rise proportionately with volatility.;B) Investors;would not choose to hold a portfolio that is more volatile unless they expected;to earn a higher return.;C) Smaller;stocks have lower volatility than larger stocks.;D) The largest;stocks are typically more volatile than a portfolio of large stocks.;3) Which of the;following statements is false?;A) Investments;with higher volatility have rewarded investors with higher average returns.;B) Investments;with higher volatility should have a higher risk premium and therefore higher;returns.;C) Volatility;seems to be a reasonable measure of risk when evaluating returns on large;portfolios and the returns of individual securities.;D) Riskier;investments must offer investors higher average returns to compensate them for;the extra risk they are taking on.;Use the table;for the question(s) below.;Consider the;following average annual returns;Investment;Average Return;Small Stocks;23.2%;S&P 500;13.2%;Corporate Bonds;7.5%;Treasury Bonds;6.2%;Treasury Bills;4.8%;4) What is the;excess return for the portfolio of small stocks?;A) 10.0%;B) 15.7%;C) 18.4%;D) 17.0%;5) What is the;excess return for the S&P 500?;A) 5.7%;B) 7.0%;C) 0%;D) 8.4%;Answer: D;6) What is the;excess return for corporate bonds?;A) 2.7%;B) 1.3%;C) -5.7%;D) 0%;7) What is the;excess return for Treasury Bills?;A) 0%;B) -8.4%;C) -2.7%;D) -1.4%;8) Do expected;returns for individual stocks increase proportionately with volatility?

 

Paper#51030 | Written in 18-Jul-2015

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