Given the following simplex tableau, complete the tableau and answer the following questions:
January 2, 2018
Common stock value-constant growth. McCracken company common stock paid a dividend of $1.20 per share last year. The company expects earnings and dividends to grow at a rate of 5% per year for the foreseeable future.
January 2, 2018

Return and Risk of small-company stocks

Question
Return and Risk of small-company stocks
Carib and Heinekin have reported the returns on small company stocks and U.S. Treasury bills for the period 1986 – 1991 as follows

Year small company stocks u.s treasury bills

1986 6.85% 6.16%

1987 -9.30 5.47

1988 22.87 6.35

1989 10.18 8.37

1990 -21.56 7.81

1991 44.63 5.60

a. Calculate the average returns on small-company stocks and u.s. treasury bills.

b. calculate the variances and standard deviations of the returns on small-company stocks and u.s. treasury bills.

c. compare the returns and risks of these two types of securities.

 

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