Chapter 12

Problems 7,8,13
Input boxes in tan
Output boxes in yellow
Given data in blue
Calculations in red
Answers in green
Chapter 12
Question 7
Input area:
Year X Y
1
2
3
4
5
Output area:
X
Actual
Return
Average
Return Deviation
1 - - -
2 - - -
3 - - -
4 - - -
5 - - -
Total -
Average return -
Variance = -
Standard Deviation = 0.00%
X
Actual
Return
Average
Return Deviation
1 - - -
2 - - -
3 - - -
4 - - -
5 - - -
Total -
Average return -
Variance = -
Standard Deviation = 0.00%
Squared
Deviation
-
-
-
-
-
-
Squared
Deviation
-
-
-
-
-
-
Chapter 12
Question 8
Input area:
Year
Large
Stocks T-bills
1970
1971
1972
1973
1974
1975
Output area:
Large company stocks
Year
Actual
Return
Average
Return Deviation
Squared
Deviation
1970 - - - -
1971 - - - -
1972 - - - -
1973 - - - -
1974 - - - -
1975 - - - -
Total - -
Average return -
Variance = -
Standard deviation = 0.00%
T-bill returns
Year
Actual
Return
Average
Return Deviation
Squared
Deviation
1970 - - - -
1971 - - - -
1972 - - - -
1973 - - - -
1974 - - - -
1975 - - - -
Total - -
Average return -
Variance = -
Standard deviation = 0.00%
Average observed risk premium
Year
Actual
Return
Average
Return Deviation
Squared
Deviation
1970 - - - -
1971 - - - -
1972 - - - -
1973 - - - -
1974 - - - -
1975 - - - -
Total - -
Average return -
Variance = -
Standard deviation = 0.00%
d. Before the fact, for most assets the risk premium will be positive; investors
demand compensation over and above the risk-free return to invest their
money in the risky asset. After the fact, the observed risk premium can be
negative if the asset's nominal return is unexpectedly low, the risk-free rate is
unexpectedly high, or if some combination of these two events occurs.
Chapter 12
Question 13
Input area:
Purchase price
Coupon rate
Current YTM
Maturity (years)
Settlement
Maturity
Inflation rate
Output area:
Current price #NUM!
Nominal return #NUM!
Real return #NUM!