Answer:
a. Arithmetic average returns for large company stocks:
= (0.0389 + 0.1414 + 0.1913 - 0.1455 - 0.3204 + 0.3737) / 6
= 4.66%
Arithmetic average returns for T-bills:
= (0.0581 + 0.0247 + 0.0370 + 0.0713 + 0.0518 + 0.0616) / 6
= 0.05075
= 5.08%
b. First find variance.
Variance of large company stock:
Variance is divided by n - 1
= {(0.0389 - 0.0466)² + (0.1414 - 0.0466)² + (0.1913 - 0.0466)² + (-0.1455 - 0.0466)² + (-0.3204 - 0.0466)² + (0.3737 - 0.0466)²} / 5
= 0.0617140
Standard deviation = √0.0617140
= 24.84%
Variance of T-bills
= {(0.0581 - 0.0508)² + (0.0247 - 0.0508)² + (0.0370 - 0.0508)² + (0.0713 - 0.0508)² + (0.0518 - 0.0508)² + (0.0616 - 0.0508)²} / 5
= 0.0002926
Standard deviation = √0.0002926
= 1.71%
c. Risk Premiums:
Year 1 Year 2 Year 3
= 3.89% - 5.81% = 14.14% - 2.47% = 19.13% - 3.70%
= -1.92% = 11.67% = 15.43%
Year 4 Year 5 Year 6
= -14.55% - 7.13% = -32.04% - 5.18% =37.37% - 6.16%
= -21.68% = -37.22% = 31.21%
Average risk premium:
= (-0.0192 + 0.1167 + 0.1543 - 0.2168 - 0.3722 + 0.3121) / 6
= -0.42%
Answer
The answer and procedures of the exercise are attached in the following archives.
Explanation
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
Answer:
with the new rate we will pay in 58 months.
if there is 2% commision charge: 59.35 = 60 months
Explanation:
Currently we owe 10,000
This will be transfer to a new credit card with a rate of 6.2%
We are going to do monthly payment of 200 dollars each month
and we need to know the time it will take to pay the loan:
We use the formula for ordinary annuity and solve for time:
C $200.00
time n
rate 0.005166667 (6.2% rate divide into 12 months)
PV $10,000.0000
We arrenge the formula and solve as muhc as we can:
Now, we use logarithmics properties to solve for time:
-57.99227477 = 58 months
part B
If there is a charge of 2% then Principal = 10,000 x 102% = 10,200
we use that in the formula and solve:
-59.34880001 = 59.35 months