The following table contains annual returns on stocks and Treasury bonds for 20 years.Mkt-RF 30-day T-bills 10-year T-bondsLarge Stocks14.4891-11.712000 -17.62001 -15.22002 -22.762003 30.752004 10.722005 3.092006 10.62007 1.045.893.781.631.021.202.964.794.672008 -38.34 1.472009 28.26 0.102010 17.37 0.124.030214.66411.27785.18623.1032.27139.643117.6664-5.82787.4457-11.42-21.1331.7711.926.0515.395.71-36.8728.3617.49 2011 0.442012 16.282013 35.22014 11.72015 0.072016 13.32017 21.52018 -6.930.040.060.030.020.010.190.791.7116.60153.5862-6.902510.15121.06650.70392.80340.04260.4816.3435.2311.720.0813.4922.29-5.222019 28.28 2.158.2622Please use Microsoft Excel to analyze the risk-return trade-off that would have characterized portfolios constructed from large stocks and long-term Treasury bonds overthe 20 years.30.431. What were the average rate of return and standard deviation of each asset?2. What was the correlation coefficient of their annual returns?3. What would have been the average return and standard deviation of portfolios with differing weights in the two assets? For example, consider weights in stocks startingat zero and incrementing by 0.10 up to a weight of 1.4. What were the average return and standard deviation of the minimum-variance combination of stocks and bonds?

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The following table contains annual returns on stocks and Treasury bonds for 20 years. Mkt-RF 30-day T-bills 10-year T-bonds Large Stocks 5.89 14.4891 -11.71 2000 -17.6 2001 -15.2 3.78 2002 -22.76 1.63 2003 30.75 2004 10.72 2005 3.09 1.02 1.20 2.96 2006 10.6 4.79 2007 1.04 4.67 2008 -38.34 1.47 2009 28.26 0.10 2010 17.37 0.12 4.0302 14.6641 1.2778 5.1862 3.103 2.2713 9.6431 17.6664 -5.8278 7.4457 -11.42 -21.13 31.77 11.92 6.05 15.39 5.71 -36.87 28.36 17.49

The following table contains annual returns on stocks and Treasury bonds for 20 years. Mkt-RF 30-day T-bills 10-year T-bonds Large Stocks 5.89 14.4891 -11.71 2000 -17.6 2001 -15.2 3.78 2002 -22.76 1.63 2003 30.75 2004 10.72 2005 3.09 1.02 1.20 2.96 2006 10.6 4.79 2007 1.04 4.67 2008 -38.34 1.47 2009 28.26 0.10 2010 17.37 0.12 4.0302 14.6641 1.2778 5.1862 3.103 2.2713 9.6431 17.6664 -5.8278 7.4457 -11.42 -21.13 31.77 11.92 6.05 15.39 5.71 -36.87 28.36 17.49

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter7: Types And Costs Of Financial Capital

Section: Chapter Questions

Problem 15DQ

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