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Category > Business & Finance Posted 09 May 2017 My Price 7.00

3.Based on the following table

3.Based on the following table of actual (or ex post) returns for both Inquiry Corporation and the market from 2007 through 2010, calculate the average return and the standard deviation for both Inquiry and the market (keep in mind that this data is historical and not based on a probability distribution, so be sure to use the correct formulas).

 

Year

Inquiry Corporation

Market

2007

4%

2%

2008

6%

3%

2009

0%

1%

2010

2%

-1%

 

 

Inquiry Corporation

  

Year

Expected return

Expected return

Deviation

2007

2%

1.25%

0.0%

2008

3%

1.25%

0.0%

2009

1%

1.25%

0.1%

2010

-1%

1.25%

0.1%

Average return

1.25%

Standard Deviation

1.71%

 

 

5. Reliable Printing is evaluating a security. One-year Treasury bills (rRF) are currently paying 3.1 percent. Calculate the following investment's expected return and its standard deviation (?). Should Reliable Printing invest in this security? Briefly explain.

 

Probability

Expected Return

0.15

-1%

0.30

2%

0.40

3%

0.15

8%

 

Probability

Expected Return

Computed Return

Probable Return

0.15

-1%

-0.2% =P*R

0.01%= (P*(-1% - 2.85%)2

0.3

2%

0.6%

0.02%

0.4

3%

1.2%

0.01%

0.15

8%

1.2%

0.00%

Expected Rate of Return 2.85% = Sum of all ( P*R)

Standard Deviation 0.04% = Sum of all (D)

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Status NEW Posted 09 May 2017 02:05 PM My Price 7.00

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