# Difference Between Average Return and Realized Return

1. The questions for this assignment is to explain the difference between the average return calculated in Problem 10-6 (a) and the realized return calculated in
10-5. Are both numbers useful? If so, explain why.

To do this assignment the two problems had to be answered. Although you will see problem 10-5 and10-6 in this document, the answers are already indicated on this sheet. Use the date from below to answer to question which is above in red. Nothing needs to be downloaded from 10-5 because it is listed below.

Don't use plagiarized sources. Get Your Custom Essay on
Difference Between Average Return and Realized Return
From \$10/Page

Problem 10-5

Download the spreadsheet from www.aw-bc.com/berk_demarzo that contains historical monthly prices and dividends (paid at the end of the month) for Ford Motor Company stock (Ticker: F) from August 1994 to August 1998. Calculate the realized return over this period, expressing your answer in percent per month.

Problem 10-6

Using the same data as in Problem 5, compute the
a. Average monthly return over this period.

b. Monthly volatility (or standard deviation) over this period.

Total Realized Return = (1+R1)x(1+R2)…x(1+R36) = a. Arithmetic Average Monthly Standard Error
1.6789 Return: 1.595% 0.910%
(This is the amount \$1 invested in Aug-94 would have grown to by Aug-97.) b. Standard Deviation of
Monthly Return: 5.458% 3.414%
Equivalent monthly return (% per month) =
1.450% -0.224%

Date End of Month Price Dividend (end of month) Monthly Return (1+Rt) Monthly Return % (Rt)
Aug-97 43.000 1.052 5.20%
Jul-97 40.875 0.420 1.087 8.67%
Jun-97 38.000 1.013 1.33%
May-97 37.500 1.079 7.91%
Apr-97 34.750 0.420 1.121 12.10%
Mar-97 31.375 0.954 -4.56%
Feb-97 32.875 1.023 2.33%
Jan-97 32.125 0.385 1.008 0.81%
Dec-96 32.250 0.985 -1.53%
Nov-96 32.750 1.048 4.80%
Oct-96 31.250 0.385 1.012 1.23%
Sep-96 31.250 0.933 -6.72%
Aug-96 33.500 1.035 3.47%
Jul-96 32.375 0.385 1.012 1.19%
Jun-96 32.375 0.887 -11.30%
May-96 36.500 1.017 1.74%
Apr-96 35.875 0.350 1.054 5.38%
Mar-96 34.375 1.100 10.00%
Feb-96 31.250 1.059 5.93%
Jan-96 29.500 0.350 1.034 3.38%
Dec-95 28.875 1.022 2.21%
Nov-95 28.250 0.983 -1.74%
Oct-95 28.750 0.350 0.935 -6.51%
Sep-95 31.125 1.012 1.22%
Aug-95 30.750 1.060 6.03%
Jul-95 29.000 0.310 0.985 -1.48%
Jun-95 29.750 1.017 1.71%
May-95 29.250 1.078 7.83%
Apr-95 27.125 0.310 1.021 2.08%
Mar-95 26.875 1.029 2.87%
Feb-95 26.125 1.035 3.47%
Jan-95 25.250 0.260 0.915 -8.48%
Dec-94 27.875 1.028 2.76%
Nov-94 27.125 0.919 -8.05%
Oct-94 29.500 0.260 1.072 7.24%
Sep-94 27.750 0.949 -0.051
Aug-94 29.250

The questions for this assignment is explain the difference between the average return calculated in Problem 10-6 (a) and the realized return calculated in 10-5. Are both numbers useful? If so, explain why. Solution Preview

Realized return per month = 1.450%
Arithmetic average return per month = 1.595%

The realized return per month as computed in Problem 10-5 is the compounded monthly growth rate of a one dollar investment for the stock from August 1994 to August 1997 for a total of 36 months while the one computed in Problem 10-6 is the sum of all the monthly returns divided by the number of months. This means that Problem 10-6 computed for the arithmetic or simple rate of return while Problem 5 computed for the compounded rate of return.

Yes, both numbers are useful. The realized rate of return computed in Problem 10-5 is useful for an investor who invested in the stock for the whole period and the number computed in Problem 10-6 would be useful for an investor who didn’t adopt a buy and hold strategy for the stock.

PROBLEM

1. The questions for this assignment is to explain the difference between the average return calculated in Problem 10-6 (a) and the realized return calculated in
10-5. Are …

Solution Summary
The difference between average return and realized returns are examined.To continue with the answer check on mycoursewriter.com/

Order NOW For A 35% Discount!
Pages (550 words)
Approximate price: -

Why Choose Us

Quality Homework Writing

Do you need to ace your test? We have qualified writers to assist you in writing 100% quality homework writing. Mycoursewriter offers students unique and personalized custom papers that help them in getting good grades. Our academic experts will assist you with your dissertation papers, thesis writing, research papers, term papers, and case study homework help. Our writers are experienced and have perfected the art of crafting the best essay writing papers regardless of your academic level. Order now and get our superb homework writing services.

A student needs professional assistance outside class time. Before hiring our writers, they undergo thorough tests and strict educational backgrounds. After passing a test, our writers undergo training to ensure they deliver expert professional papers to our customers. We ensure they meet the timely delivery of papers and follow our customers' provided instructions. Every writer is an ENL writer and is from the USA, Canada, UK, or Australia. Our experts approach papers effectively depending on their area of specialization.

Affordable Price Guarantees

Is the deal too good to be true? Mycoursewriter is the most affordable assignment help website on the market. We consider students' daily needs for academic help. Our paper costs are reasonably priced to approximately 90% of students around the globe. Our main aim is to ensure students achieve academic excellence, and we believe inconsiderable prices should not hinder students from getting quality homework writing help. In case of any dissatisfaction, we offer unlimited revisions and rewrites without extra charges.

Timely delivery of papers

Tight deadline? Is your paper due in the next few hours? Worry no more. Our writers are here for your rescue. Many college students find it hard to balance their social and academic life and get caught up with academic deadlines. Drafting your paper at the last minute does not allow you to conduct extensive research and craft the correct answers. We have expert writers ready to work on your assignment writing. Urgent writing services are the ultimate solutions you need. We guarantee you timely delivery of papers at your convenience and specified time delivery of the customer.

The ultimate deal-breaker in achieving good grades is submitting imitative papers. Plagiarism is a breach of examination standards and has serious consequences. Students need to deliver papers written in their understanding by paraphrasing their research findings and relevant citations. Our expert's primary consideration is providing free plagiarized papers that meet the lecturers' requirements. Our editors will proofread your paper before delivery ad ensure your papers will not be substandard. We guarantee extreme originality, and in case of any customer concerns, we offer a plagiarism report.

All Round the clock Customer Support

Our website is user-friendly and super useful! Mycoursewriter is the most trusted online writing website always available to provide you with assignment writing services that you need. Our primary concern is meeting customer need specifications by our friendly customer support team that Is available all the time. Our website usability is self-learnable but in case of any problem, feel free to contact us directly through our website email: support@mycourserwiter.com. We have diligently satisfied thousands of students, and you can witness this on our sites' review page.

Try it now!

## Calculate the price of your order

We'll send you the first draft for approval by at
Total price:
\$0.00

How it works?

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Advantages of Using Our Assignment writing Services

Mycoursewriter welcomes you for superb essay writing services. We are a legit site offering help with your most challenging homework writing assignments at affordable prices. Your essay paper will be assigned to a professional writer who will craft the paper from scratch according to your provided instructions.

## Essay Writing and Proofreading Services

Essay writing is a common assignment writing for most college students. It takes a lot of time to craft a complete perfect essay. Mycourserwiter offers the best essay writing and proofreading services for most college students. Your paper is assigned to an expert writer who does thorough research on fresh ideas and personalizes your essay paper according to your assignment writing guidelines. Our essays are entirely exceptional and undergo a strict procedure that includes papers free from plagiarism and thorough proofreading.