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3 years ago

A stock had returns of 18.58%, -5.58%, and 20.81% for the past three years. What is the variance of returns?

Business

1 answer:

NemiM [27]3 years ago

7 0

Answer:

Variance = 0.02141851

Explanation:

We first calculate the mean for the stocks

Mean = (0.1858 - 0.0558 + 0.2081) / 3

Mean = 0.3381 / 3

Mean = 0.1127

Variance = [(0.1858 - 0.1127)^2 + (- 0.0558 - 0.1127)^2 + (0.2081 - 0.1127)^2] / 3 -1

Variance = [0.0731^2 + (-0.1685^2) + 0.0954^2] / 2

Variance = 0.00534361 + 0.02839225 + 0.00910116 / 2

Variance = 0.04283702 / 2

Variance = 0.02141851

The variance of returns is 0.02141851

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Suppose we have the following Treasury bill returns and inflation rates over an eight year period:Year Treasury Bills (%) Inflat

natali 33 [55]

Answer:

Year Treasury Bills Inflation Real return

1 7.82 9.42 -1.48

2 8.6 13.04 -3.93

3 6.44 7.55 -1.03

4 5.6 5.35 0.24

5 6.02 7.31 -1.20

6 8.25 9.67 -1.29

7 11.23 13.98 -2.41

8 12.85 13.37 -0.46

a. Average return for Treasury bill = (7.82 + 8.6 + 6.44 + 5.6 + 6.02 + 8.25 + 11.23 + 12.85) / 8

Average return for Treasury bill = 66.81 / 8

Average return for Treasury bill = 8.35125

Average return for Treasury bill = 8.35

Average annual inflation rate = (9.42 + 13.04 + 7.55 + 5.35 + 7.31 + 9.67 + 13.98 + 13.37) / 8

Average annual inflation rate = 79.69 / 8

Average annual inflation rate = 9.96125

Average annual inflation rate = 9.96

b. X bar = Average

Standard Deviation = (x-X)^2

For year 1 = (7.82 - 8.35)^2 = 0.2809. Hence, the Standard deviation of other years will be calculated and summed-up to give the Standard deviation of Treasury bill return and of Inflation over this period respectively.

Standard deviation of Treasury bill returns = 2.55

Standard deviation of inflation over this period = 3.20

c. Real return for Treasury bills = ((1+nominal return)/(1+inflation rate)-1)*100

For Year 1, Real return = (1 + 7.82%) / (1 + 9.42%) - 1) * 100

Real return = 1 + 0.078 / (1 + 0.0942) - 1 * 100

Real return = (1.078 / 1.0942) -1 * 100

Real return = 0.98519 - 1 * 100

Real return = -0.01480 * 100

Real return = -1.48

Hence, the average real return for Treasury bills over this period = (-1.48 + -3.93 + -1.03 + 0.24 + -1.20 + -1.29 + -2.41 + -0.46) / 8

Average real return for Treasury bills = -11.56 / 8

Average real return for Treasury bills = -1.445

4 0

3 years ago

Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $0.65 at the end of the year. Its div

Anastaziya [24]

Answer:

14.90%

Explanation:

We know,

Current stock price, $P_{0}$ = $\frac{D_{1}}{r_{s} - g}$

Given,

Current stock price, $P_{0}$ = $12.00

growth rate, g = 9.50% = 0.095

Expected annual dividend, $D_{1}$ = $0.65

We have to determine the expected rate of return ( $r_{s}$ ).

Putting the values into the above formula, we can get,

Current stock price, $P_{0}$ = $\frac{D_{1}}{r_{s} - g}$

or, $12.00 = $0.65 ÷ ( $r_{s}$ - 0.095)

or, $12.00 × ( $r_{s}$ - 0.095) = $0.65

or, $r_{s}$ - 0.095 = $0.65 ÷ $12.00

or, $r_{s}$ - 0.095 = 0.0542

or, $r_{s}$ = 0.054 + 0.095

Therefore, $r_{s}$ = 0.149

The expected rate of return = 0.149 or 14.90%

7 0

3 years ago

You are given the following information: Stockholders’ equity asreported on the firm’s balance sheet = $3.75 billion, price/earn

Helen [10]

Answer:

The price of a share of the company’s common stock is $142.50

Explanation:

Through by applying the market book ratio, first we have to find out the book value per share which is shown below:

Book value of share = Equity ÷ common shares outstanding

= $3750 million ÷ 50 million

= $75

We convert the $3.75 billion to million

Now we know that

Market/book ratio = Market value per share ÷ book value per share

1.9 = Market value per share ÷ $75

So, the market value per share = $142.50

5 0

4 years ago

Managerial accounting is primarily focused on: a. Providing information for internal and external users b. Providing general pur

sp2606 [1]

Answer:

c. Providing special-purpose information and reports

Explanation:

Managerial or management accounting unlike financial accounting which focuses on historical data involves the review of management's forecast or budget with the actual results obtained.

It is used by management for internal decision making unlike financial accounting which follows a defined framework that is useful for both internal and external users of the financials.

Hence, Managerial accounting is primarily focused on Providing special-purpose information and reports.

3 0

3 years ago

Read 2 more answers

After the first two entries in the closing process have been recorded and posted, the debits and credits to Income Summary are $

Dafna1 [17]

The answer is $10,000 net loss.

Given,

The debits and credits to Income Summary are $90,000 and $80,000, respectively.

An income summary is also known as an Income statement.

The debit side of this statement contains the expense for the period.

And the credit side of this statement contains the income for the period.

Therefore, according to the given information expenses are $90,000 and income is $80,000.

Since expenses incurred are greater than the income generated. There is a net loss for the current period.

The amount of the net loss will be calculated as follows:

Net loss = Amount of expenses - Amount of income

= 90000 - 80000

= $10,000

Hence, the amount of net loss for the period is $10,000.

Learn more about Income summary:

brainly.com/question/24498019

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6 0

2 years ago