# finance data bank

Question # 00004298 Posted By: spqr Updated on: 12/01/2013 11:00 AM Due on: 12/27/2013
Subject Finance Topic Finance Tutorials:
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.

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%

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?

Tutorials for this Question
1. ## Solution: finance data bank

Tutorial # 00004096 Posted By: spqr Posted on: 12/01/2013 11:50 AM
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