Homework week 5 1. (TCO 8) Over the period of 1955-2006: (Points : 3) long-term

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    Homework week 5
    1. (TCO 8) Over the period of 1955-2006: (Points : 3) long-term government bonds underperformed large corporate stocks. small-company stocks underperformed large-company stocks. inflation exceeded the rate of return on U.S. Treasury bills. U.S. Treasury bills outperformed long-term government bonds.
    6. (TCO 8) For this exercise use the information provided for Problem 30 of Chapter 11 (page 375 of your textbook).
    Homework week 5
    1. (TCO 8) Over the period of 1955-2006: (Points : 3) long-term government bonds underperformed large corporate stocks. small-company stocks underperformed large-company stocks. inflation exceeded the rate of return on U.S. Treasury bills. U.S. Treasury bills outperformed long-term government bonds.
    6. (TCO 8) For this exercise use the information provided for Problem 30 of Chapter 11 (page 375 of your textbook). Assume that the probability of the state of the economy has changed as follows: The probability of a recession has increased to 30% and the probability for a normal state of economy is now 40%. The market risk premium has increased by 1% as well. What is the standard deviation of Stock I and II respectively? (Points : 3) 12 and 20% 12.5 and 23% 1.25 and 2.326% Cannot be determined with the information given
    7. (TCO 8) For this exercise use the information provided for Problem 30 of Chapter 11 (page 375 of your textbook). Assume that the probability of the state of the economy has changed as follows: The probability of a recession has increased to 30% and the probability for a normal state of economy is now 40%. The market risk premium has increased by 1% as well. Which statement is true? Select all that apply: (Points : 4) Stock I has more overall risk than Stock II Stock II has less systematic risk than Stock I Stock I has a higher risk premium than Stock II None of the above are correct statements
    9. (TCO 8) Which type of risk does beta measure? Look at Table 11.8 in your textbook. Does this table indicate that Citibank has a higher overall risk than Home Depot? Why or why not? (Points : 3)
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