Project #44281 - Chapter 9

1. 

The table below shows your stock positions at the beginning of the year, the dividends that each stock paid during the year, and the stock prices at the end of the year.

 

  Company Shares Beginning of
Year Price
Dividend Per Share End of Year Price
  Johnson Controls   550   $ 73.11   $ 1.21   $ 86.02  
  Medtronic   400     57.77     0.45     53.71  
  Direct TV   700     25.14           24.59  
  Qualcomm   100     43.28     0.41     39.12  

 

What is your portfolio dollar return and percentage return? (Round your answers to 2 decimal places.)

 

Portfolio Return
  Dollar return       
  Percentage return  %  

 

 

2. 

Annual Returns for Stocks, Bonds, and T-Bills 2000 to 2009

  

    Stocks
(S&P 500)
Bonds T-bills
  2000 Annual return 9.1 %   20.1 %   5.9 %
  2001 Annual return 11.9     4.6     3.5  
  2002 Annual return 22.1     17.2     1.6  
  2003 Annual return   28.7     2.1     1.0  
  2004 Annual return   10.9     7.7     1.4  
  2005 Annual return   4.9     6.5     3.1  
  2006 Annual return   15.8     1.9     4.7  
  2007 Annual return   3.5     9.8     4.4  
  2008 Annual return 35.5     22.7     1.5  
  2009 Annual return   23.5   12.2     0.2  

    

You have a portfolio with an asset allocation of 58 percent stocks, 30 percent long-term Treasury bonds, and 12 percent T-bills. Use these weights and the returns is given in the above table to compute the return of the portfolio in the year 2000 and each year since.  Then compute the average annual return and standard deviation of the portfolio. (Negative answers should be indicated with a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places.)

  

  Portfolio Return
  2000  %  
  2001  %  
  2002  %  
  2003  %  
  2004  %  
  2005  %  
  2006  %  
  2007  %  
  2008  %  
  2009  %  
   
  Average  %  
  Std dev  %  

 

 

3. 

Rank the following three stocks by their risk-return relationship, best to worst. Night Ryder has an average return of 11 percent and standard deviation of 24 percent. The average return and standard deviation of WholeMart are 12 percent and 29 percent; and of Fruit Fly are 17 percent and 25 percent.

  

Rank Stock
1
2
3

 

 

4. 

If you own 550 shares of Alaska Air at $54.88, 600 shares of Best Buy at $63.32, and 400 shares of Ford Motor at $9.01, what are the portfolio weights of each stock? (Round your answers to 3 decimal places.)

  

  Portfolio weights
  Alaska Air   
  Best Buy   
  Ford Motor   

 

5. 

You have $28,000 to invest. You want to purchase shares of Xerox at $18.14, Qwest at $8.95, and Liz Claiborne at $45.53. How many shares of each company should you purchase so that your portfolio consists of 10 percent Xerox, 35 percent Qwest, and 55 percent Liz Claiborne? (Do not round intermediate calculations and round your final answers to the nearest whole number.)

 

  
  Xerox  shares  
  Qwest  shares  
  Liz Claiborne  shares  

 
 
6.  

A corporate bond that you own at the beginning of the year is worth $945. During the year, it pays $59 in interest payments and ends the year valued at $935.

  

What was your dollar return and percent return? (Round your "Percent return" to 2 decimal places.)

  

 
  Dollar return  
  Percent return  %

 
7. 

The past five monthly returns for Kohl’s are 3.70 percent, 4.02 percent, −1.84 percent, 9.33 percent, and −2.72 percent. Compute the standard deviation of Kohls’ monthly returns. (Do not round intermediate calculations and round your final answer to 2 decimal places.)


  Standard deviation  %  

 
8. 
Table 9.2 Average Returns for Bonds

  

    Bonds
  1950 to 1959 Average   0.0 %
  1960 to 1969 Average   1.9  
  1970 to 1979 Average   5.8  
  1980 to 1989 Average   13.9  
  1990 to 1999 Average   9.1  
  2000 to 2009 Average   8.7  

 

Table 9.4 Annual Standard Deviation for Bonds

 

  Bonds
  1950 to 1959   4.5 %
  1960 to 1969   6.5  
  1970 to 1979   6.6  
  1980 to 1989   15.8  
  1990 to 1999   12.8  
  2000 to 2009   10.9  

   

Calculate the coefficient of variation of the risk-return relationship of the bond market (Use the above Tables) during each decade since 1950. (Round your answers to 2 decimal places.)

  

Decade CoV
  1950s Not Available  
  1960s   
  1970s   
  1980s   
  1990s   
  2000s   

 
9. 
Consider the following annual returns of Estee Lauder and Lowe’s Companies:

 

  Estee Lauder Lowe’s Companies
  Year 1   25.3 % 7.0 %
  Year 2 38.0     18.0  
  Year 3   19.5     6.1  
  Year 4   51.8     58.0  
  Year 5 18.7   28.0  

  

Compute each stock’s average return, standard deviation, and coefficient of variation. (Round your answers to 2 decimal places.)

 

  Estee Lauder   Lowe’s Companies
  Average return  %      %  
  Standard deviation  %      %  
  Coefficient of variation                

  

Which stock appears better?

  

Lowe’s Companies
Estee Lauder
 
 
10. 

Rank the following three stocks by their risk-return relationship, best to worst. Rail Haul has an average return of 11 percent and standard deviation of 22 percent. The average return and standard deviation of Idol Staff are 14 percent and 32 percent; and of Poker-R-Us are 8 percent and 18 percent.

  

Rank Stock
1
2
3

Subject Business
Due By (Pacific Time) 10/24/2014 12:00 am
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