Chapter_10_sol_students

986857 11071067 10071067 diff3

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Unformatted text preview: 2002 2003 2004 2005 46.3% 26.7% 86.9% 23.1% 0.2% -3.2% -27.0% 27.9% -5.1% -11.3% 29.85% 10.25% 70.45% 6.65% -16.25% -19.65% -43.45% 11.45% -21.55% -27.75% 0.0891023 0.0105063 0.4963203 0.0044223 0.0264063 0.0386123 0.1887903 0.0131103 0.0464403 0.0770063 Variance = SUM of (R - R)2 / T - 1 = 0.9907165 / 9 = 0.1100796 Standard deviation = Variance = 0.1100796 = 0.3317825 Standard error = Standard Deviation / T = 0.3317825 / 10 = .03318 or 3.32% 95% Confidence Interval = mean return + or - 2 standard errors, so lower bound = .1638 - 2 × .0332= .101 upper bound = .1638 + 2 × .0332 = .227 C) D) Diff: 3 Topic: 10.3 Historical Returns of Stocks and Bonds Skill: Analytical 11) The geometric average annual return on the S&P 500 from 1996 to 2005 is closest to: A) 9.75% B) 8.75% C) 7.10% D) 8.35% Answer: C Explanation: A) B) C) Geometric Average = T (1 + R1 )(1 + R2 )....(1 + RT ) - 1 = D) 10 1.986857 - 1 = 1.071067 - 1 = 0.071067 Diff: 3 Topic: 10.3 Historical Returns of Stocks and Bonds Skill: Analytical Use the table for the question(s) below. Consider the following Price and Dividend data for General Motors: Date Price ($) Dividend ($) December 31, 2004 $40.06 February 9, 2005 $36.80 $0.50 May 7, 2005 $30.41 $0.50 August 10, 2005 $34.86 $0.50 November 8, 2005 $25.86 $0.50 December 30, 2005 $18.86 12) Assume that you purchased General Motors stock at the closing price on December 31, 2004 and sold it at the closing price on December 30, 2005. Calculate your realized...
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