Finance Homework Problems

Q.1.You bought a share of 3 percent preferred stock for $96.67 last year. The market price for your stock is now $98.43
 
What was your total return for last year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
 
  Total return   % 

Q2. You’ve observed the following returns on Mary Ann Data Corporation’s stock over the past five years: 10 percent, –10 percent, 17 percent, 22 percent, and 10 percent. Suppose the average inflation rate over this period was 1.5 percent and the average T-bill rate over the period was 3.0 percent.

What was the average real risk-free rate over this time period? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Average real risk-free rate   % 

What was the average real risk premium? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Average real risk premium   % 

Q3.Consider the following rates of return:

Year Large Company US Treasury Bill
1    3.99 % 6.65 %
2   14.50 4.46
3   19.39 4.33
4 –14.29 7.34
5 –31.78 5.44
6   37.10 6.45
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Calculate the standard deviation of the returns for large-company stocks and T-bills over this period.(Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

  Standard deviation
  Large company stocks   % 

  T-bills   % 

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c-1 Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. What was the arithmetic average risk premium over this period? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 Average risk premium   % 

c-2 Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. What was the standard deviation of the risk premium over this period? (Round your answer to 2 decimal places. (e.g., 32.16))

  Standard deviation   % 

Q4.

  Returns 
Year X Y 
1   13  %   18  % 
2   27     28   
3 – 20   – 25   
4   8     10   
5   10     19   
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Using the returns shown above, calculate the average returns, the variances, and the standard deviations for X and Y (Do not round intermediate calculations and round your final percentage answer to 2 decimal places. (e.g., 32.16) and variances to 5 decimal places. (e.g., 32.16161))
 
  X Y
  Average returns   % 
  % 

  Variances       
      

  Standard deviations   % 
  % 

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