A stock had annual returns of 3.6 percent, -8.7 percent, 5.6 percent, and 12.5 percent over the past four years.

What is the amount of the risk premium on a U.S. Treasury bill if the risk-free rate is 2.8 percent and the market rate of return is 8.35 percent?    A.  0.00 percent B.  2.80 percent C.  5.55 percent D.  8.35 percent E.  11.15 percent There is no excess return, or risk premium, for a risk-free security such as the T-bill.

68.

A stock had returns of 11 percent, -18 percent, -21 percent, 20 percent, and 34 percent over the past five years. What is the standard deviation of these returns?    A.  18.74 percent B.  20.21 percent C.  20.68 percent D.  24.01 percent E.  23.49 percent Average return = (0.11 - 0.18 - 0.21 + 0.20 + 0.34)/5 = .052; σ = √[1/(5 - 1)] [(0.11 - 0.052)2 + (-0.18 - 0.052)2 + (-0.21 -0.052)2 + (0.05 - 0.052)2 + (0.34 - 0.052)2] = 24.01 percent

69.

The common stock of Air United, Inc., had annual returns of 15.6 percent, 2.4 percent, -11.8 percent, and 32.9 percent over the last four years, respectively. What is the standard deviation of these returns?    A.  13.29 percent B.  14.14 percent C.  16.50 percent D.  17.78 percent E.  19.05 percent Average return = (0.156 + 0.024 - 0.118 + 0.329)/4 = 0.09775 σ = √[1/(4 - 1)] [(0.156 - 0.09775)2 + (0.024 - 0.09775)2 + (-0.118 - 0.09775)2 + (0.329 - 0.09775)2] = 19.05 percent

70.

A stock had annual returns of 3.6 percent, -8.7 percent, 5.6 percent, and 12.5 percent over the past four years. Which one of the following best describes the probability that this stock will produce a return of 22 percent or more in a single year?    A.  less than 0.1 percent B.  less than 0.5 percent but greater than 0.1 percent C.  less than 1.0 percent but greater the 0.5 percent D.  less than 2.5 percent but greater than 0.5 percent E.  less than 5 percent but greater than 2.5 percent Average return = (0.036 - 0.087 + 0.056 + 0.125)/4 = 0.0325 ∑ = √[1/(4 - 1)] [(0.036 - 0.0325)2 + (-0.087 - 0.0325)2 + (0.056 - 0.0325)2 + (0.125 - 0.0325)2] = 0.0883 Upper end of 95 percent range = 0.0325 + (2 × 0.0883) = 20.91 percent Upper end of 99 percent range = 0.0325 + (3 × 0.0883) = 29.75 percent A return of 22 percent or more in a single year has between a 1 percent and a 2.5 percent probability of occurring in any one year.