Finance 101 - this number std deviation Grand parents...

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Finance 11/5 T-bills almost no chance to default short term- very little risk Purchasing power risk 12.3-3.8= 8.5 11.7-3.8= 7.9 Market risk premium around 8% Appproximiate Real return= Tbills – ST “Risk Free” For final: mean + or – 1(deveation)= 685 2o (deviation)= 95% 3o (deviation)= 99% real historical mean = (1+R)/(1+H) -1
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Unformatted text preview: this number +std deviation Grand parents invested 1000 In 1925 and how much worth in 2006 Average rate of return compounds R=(FV/PV) *1/t -1 Arithemtic return add up divide by 6 typical yr Geometric return [(1+R1) (1+R2)……….(1+R’T)] 1/T -1 longer rate...
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