1.From the information below, compute the average annual return, the variance, standard deviation, and coefficient of variation for each asset.
|
Asset
|
Annual Returns
|
|
A
|
5%,10%,15%,4%
|
|
B
|
-6%,20%,2%,-5%,10%
|
|
C
|
12%,15%,17%
|
|
D
|
10%,-10%,20%,-15%,8%,-7%
|
|
|
Asset A
|
Asset B
|
Asset C
|
Asset D
|
|
|
5%
|
-6%
|
12%
|
10%
|
|
|
10%
|
20%
|
15%
|
-10%
|
|
|
15%
|
2%
|
17%
|
20%
|
|
|
4%
|
-5%
|
|
-15%
|
|
|
|
10%
|
|
8%
|
|
|
|
|
|
-7%
|
|
Average
|
9%
|
4%
|
15%
|
1%
|
|
Variance
|
0.0026
|
0.0119
|
0.0006
|
0.0186
|
|
Std. dev
|
5.07%
|
10.92%
|
2.52%
|
13.65%
|
|
Coeff of var.
|
0.60
|
2.60
|
0.17
|
13.65
|
2.Based upon your answers to question 1, which asset appears riskiest based on standard deviation? Based on coefficient of variation?
ASSET D appears the riskiest based in standard & coefficient.
3.Recalling the definitions of risk premiums in Chapter 8 and using the Treasury bill return in Table 12.4 as an approximation to the nominal risk-free rate, what is the risk premium from investing in each of the other asset classes listed in Table 12.4?
4.What is the real, or after-inflation, return from each of the asset classes listed in table 12.4?
|
|
Treasury Bill
|
Treasury Bond
|
Stocks
|
Inflation Rate
|
|
Annual Ave Return
|
3.8%
|
5.4%
|
11.1%
|
3.2%
|
|
Standard Deviation
|
3.0%
|
7.6%
|
20.4%
|
4.0%
|