1. From the information below, compute the average annual return, the variance, standard deviation, and coefficient of variation for each asset.ASSET ANNUAL RETURNSA 5%, 10%, 15%, 4%B 2 6%, 20%, 2%, 2 5%, 10%C 12%, 15%, 17%D 10%, 2 10%, 20%, 2 15%, 8%, 2 7%2. Based upon your answers to question 1, which asset appears riskiest based on standard deviation? Based on coefficient of variation?7. Find the real return, nominal after-tax return, and real after-tax return on the following:STOCK NOMINAL RETURN INFLATION TAX RATEX 13.5% 5% 15%Y 8.7% 4.7% 25%Z 5.2% 2.5% 28% 9. Using the information below, compute the percentage returns for the following securities:SECURITYPRICETODAYRoadRunner $20.05StockWiley Coyote $33.42stockAcme longtermPRICE ONE DIVIDENDS INTERESTYEAR AGO RECEIVED RECEIVED$18.67$0.50$45.79$1.10bondsAcme shorttermbondsXlingshotStock$1,015.38$991.78$996.63$989.84$5.43 $3.45$100.00$45.75$0.0210. Given her evaluation of current economic conditions, Ima Nutt believes there is a 20 percent probability of recession, a 50 percent chance of continued steady growth, and a 30 percent probability of infl ationary growth. For each possibility, Ima has developed an interest rate forecast for long-term Treasury bond interest rates:ECONOMIC INTEREST RATEFORECAST FORECASTRecession 6 percentConstant growth 9 percentInfl ation 14 percenta. What is the expected interest rate under Imaâs forecast?b. What is the variance and standard deviation of Imaâs interest rate forecast?c. What is the coeffi cient of variation of Imaâs interest rate forecast?d. If the current long-term Treasury bond interest rate is 8 percent, should Ima consider purchasing a Treasury bond? Why or why not?11. Ima is considering a purchase of Wallnut Company stock. Using the same scenarios and probabilities as in problem 10, she estimates Wallnutâs return is 2 5 percent in a recession, 20 percent in constant growth, and 10 percent in infl ation.a. What is Imaâs expected return forecast for Wallnut stock?b. What is the standard deviation of the forecast?c. If Wallnutâs current price is $20 per share and Wallnut is expected to pay a dividend of $0.80 per share next year, what price will Ima expect Wallnut to sell for in one year?
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