FMweek4.docx - Chapter 12 Problem 1 From the information listed in the text compute the average annual return the variance standard deviation and

FMweek4.docx - Chapter 12 Problem 1 From the information...

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Chapter 12 Problem 1 From the information listed in the text, 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% A) 5,10,15,4=34/4=8.5 Average annual return = 8.5 5-8.5=-3.5 3.5*3.5=12.25 10-8.5=1.5 1.5*1.5=2.25 15-8.5=6.5 6.5*6.5=42.25 4-8.5=-4.5 4.5*4.5=20.25 77 / (4-1) = 25.66 Variance Standard Deviation square root of 25.66 = 5.065 CV= 5.065 / 8.5 = .60 B) -6, 20,2,-5,10=20.59 21/5=4.2 Average annual return = 4.2 -6 -4.2= -10.2 10.2*10.2=104.04 20-4.2= 15.8 15.8*15.8=249.64 2-4.2= -2.2 2.2*2.2=4.84 -5 – 4.2= -9.2 9.2*9.2=84.64 10-4.2= 5.8 5.8*5.8=33.64 476.8 476 / (5-1) = 119 Variance
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Standard Deviation is the square root of 119 = 10.908 10.908 / 4.2 = 2.597 CV = 2.60 C) 12, 15 ,17=44/3=14.67 Average Annual Return=14.67 12-14.67= -2.67 2.67*2.67= 7.13 15-14.67= .33 .33*.33= .11 (.1089) 17-14.67= 2.33 2.33*2.33= 5.43 12.67 12.67 / (3-1) = 6.34 Variance (6.335) Standard Deviation is the square root of 6.34 = 2.52 (2.517) 2.52/14.67=.17 (.1717) CV= .17 D) 10, -10, 20, -15, 8, -7 = 8/6=1.33 Average Annual return=1.33 10 – 1.33=8.67 8.67*8.67=75.17 -10 – 1.33= -11.33 11.33*11.33=128.37 20-1.33= 18.67 18.67*18.67=348.57 -15 – 1.33= -16.33 16.33*16.33=266.67 8-1.33=6.67 6.67*6.67=44.49 -7 – 1.33= -8.33 8.33*8.33=69.39 932.66 932.66 / (6-1)= 186.53 Variance
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Standard Deviation is the square root of 186.53 = 13.66 (13.657) CV 13.66 / 1.33 = 10.27 Problem 2
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  • Spring '14
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