Finance



1)
Arithmetic mean Standard Deviation
1. Intermediate T-Bond 2.15592593 7.08417535
2. T-bond 2.74185185 12.7163729
3. EAFE Index 7.49074074 23.4421382
4. S&P 500 5.31518519 16.8600115
5. Small Stock Index 8.01444444 24.8112222


2) Payoff per $1.00 Invested

1. Intermediate T-bond $10.05447301
2. T-bond $10.47833304
3. EAFE Index $23.11274502
4. S&P Index $15.0826532
5. Small Stock Index $22.6971407


The EAFE Index would have had the biggest payoff if $1.00 was invested.

3) Payoff Inflation Increase in purchasing power

S&P : 15.08265 / 4.324340574 3.49 increase from holding S&P.

1-month T-bill: 6.146689 / 4.324340574 1.42 increase from holding T-bill.




4) Reward to variability

1. Intermediate T-bond 0.30433
2. T-bond 0.215616
3. EAFE Index 0.319542
4. S&P Index 0.315254
5. Small Stock Index 0.323017


The small stock index gives us the best tradeoff during the 27 year period with a reward to variability of 0.323017, the highest of all of the assets in this sample.



5) Arithmetic Average Std. Dev. Reward to Var.

Passive International Portfolio : 4.976556 12.87484 0.386533

The reward to variability is higher for this portfolio than any other portfolios we calculated thus far.



6)

Portfolio of 40% Long-term Bonds and 60% S&P 500 :

Arithmetic Average : 4.285851852
Standard deviation : 13.5640429
Reward to Var. : 0.315971564

The Reward to variability ratio for the passive international portfolio exceeds that of the portfolio of 40% Long-term Bonds and 60% S&P 500 Index.


8) The estimated beta for Chrysler Corporation was 1.70288964 for the period 1987 - 1990. For a portfolio of Utility stocks for the same time period, the beta was 0.62188145. These betas were derives from using the S&P excess return index.

Category: Business