Over the past 75 year period short term cash investments have provided average annual returns of approximately 2 to 5% 4 to 8% 8 to 10% 18 to 20%
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Step 1: Identify the range of average annual returns for short-term cash investments over the past 75 years. Show more…
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TABLE 5.3 Risk and return of investments in major asset classes, 1927–2016 T-bills T-bonds Stocks Arithmetic average 3.42 5.51 11.91 Risk premium N/A 2.08 8.48 Standard deviation 3.14 8.14 19.99 max 14.71 38.07 56.38 min −0.02 −8.47 −43.73
Kumar A.
You are choosing between these four investments and you want to be 95% certain that you do not lose more than 8.00% on your investment. Which investments could you choose? Small stocks, S&P 500, corporate bonds, T-bills. Average return: 18.37%, 11.84%, 6.47%, 3.46%. Standard deviation of returns: 38.79%, 20.01%, 6.98%, 3.14%. (Select the best choice below.)
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The rate of return of stock indexes is approximately normal. Since 1945, the Standard & Poor's 500 has had a mean return of about 12%, with a standard deviation of about 16.5%. Take this normal distribution to be the distribution of yearly returns over a long period. a) In what range do the middle 95% of all yearly returns lie? b) The market is down for the year if the return on the index is less than zero. In what percent of years is the market down?
Tim T.
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