From the information below, compute the average annual return, the variance, sta

Question

From the information below, 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%



2.Based upon your answers to question 1, which asset appears riskiest based on standard deviation? Based on coefficient of variation?



3.Recalling the definitions of risk premiums from Chapter 8 and using the Treasury bill return in Table 12.4 as an approximation to the nominal risk-free rate, what is the risk premium from investing in each of the other asset classes listed in Table 12.4?



4.What is the real, or after-inflation, return from each of the asset classes listed in Table 12.4?


here is table
Table 12.4 - Historical Returns and Standard Deviation of Returns from Different Assets, 1928-2008:

Annual Average Return - Treasury Bills (3.8%), Treasury Bonds (5.4%), Stocks (11.1%), Inflation Rate (3.2%)

Standard Deviation - Treasury Bills (3.0%), Treasury Bonds (7.6%), Stocks (20.4%), Inflation Rate (4.0%)

Explanation / Answer

average annual return A. (5+10+15+4)/4=8.5% B. sum(-6%, 20%, 2%, -5%, 10%)/5=4.2% C. sum(12%, 15%, 17%)/3=14.67% D. sum(10%, -10%, 20%, -15%, 8%, -7%)/6=1% variance: A.(3.5+1.5+6.5+4.5)/4=4 B. (10.2+15.8+2.2+9.2+5.8)/5=8.64 C. (2.67+0.33+2.33)/3=1.78 D. (9+11+19+16+7+8)/6=11.67 D asset appears riskiest based on standard deviation

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