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23 Nov 2019

The return on a portfolio that invests 40% in large-company stocks and 60% in long-term government bonds is percent. The return on a portfolio that is equally invested in small-company stocks and Treasury bills is percent. (Do not include the percent signs (%). Round your answers to 2 decimal places, (e.g., 32.16.))

Investment Average Return
Large-company stocks 13.2%
Small-company stocks 18
Long-term corporate bonds 5.8
Long-term government bonds 5.5
U.S. Treasury bills 3.5
Inflation 4.1

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Related questions

Over the past 84 years, we have observed that investments with the highest average annual returns also tend to have the highest standard deviations of annual returns. This observation supports the notion that there is a positive correlation between risk and return. Which of the following answers correctly ranks investments from highest to lowest risk (and return), where the security with the highest risk is shown first, the one with the lowest risk last?
a. U.S. Treasury bills, long-term government bonds, long-term corporate bonds, small-company stocks, large-company stocks.
b. Small-company stocks, large-company stocks, long-term corporate bonds, long-term government bonds, U.S. Treasury bills.
c. Large-company stocks, small-company stocks, long-term corporate bonds, U.S. Treasury bills, long-term government bonds.
d. Large-company stocks, small-company stocks, long-term corporate bonds, long-term government bonds, U.S. Treasury bills.
e. Small-company stocks, long-term corporate bonds, large-company stocks, long-term government bonds, U.S. Treasury bills.

explain your answer

Consider the following information on large-company stocks for a period of years.

Series

Arithmetic Mean
Large-company stocks 14.1 %
Small-company stocks 16.4
Long-term corporate bonds 6.2
Long-term government bonds 6.1
Intermediate-term government bonds 5.6
U.S. Treasury bills 3.8
Inflation 4.0

1) What was the arithmetic average annual return on large-company stocks in nominal terms? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

2) What was the arithmetic average annual return on large-company stocks in real terms? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Consider the following information on large-company stocks for a period of years.

Series

Arithmetic Mean
Large-company stocks 14.5 %
Small-company stocks 16.4
Long-term corporate bonds 6.2
Long-term government bonds 6.1
Intermediate-term government bonds 5.6
U.S. Treasury bills 3.8
Inflation 4.4
Required:
(a)

What was the arithmetic average annual return on large-company stocks in nominal terms? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
Nominal return %
(b)

What was the arithmetic average annual return on large-company stocks in real terms? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
Real return %

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