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Essay / Research Paper Abstract
This 4 page paper performs some calculations concerning investment returns. The first question looks at the average rate of return for two investments over the same period, the standard deviation and the difference in actual return, The second part of the paper uses a weighted average approach to calculate the beta of a portfolio where the betas of the individual investments have been given. The bibliography cites 2 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEinvcal.rtf
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Unformatted sample text from the term paper:
In this question we are given a ranger of interest rates over two investments over the same period. For this we need to calculate
the average, the standard deviation and the coefficient of variation (Curwin and Slater, 2003). As these are in percentages the answers are also given in percentage terms. This gives us
the following. Year Return X Return Y 1997 16.50% 17.50% 1998 14.20% 13.20% 1999 13.50% 14.50% 2000 16.10% 15.10% 2001 12.20% 13.20% 2002 11.50% 10.50% Average 14.00% 14.00% Standard
deviation 2.02% 2.33% Coefficient of Variation -2.37% -2.87% Here we can see that there is a similar return, the actual returns will vary due to the way the average is
made up with different combinations. Return Y has a greater variation and as such may also be seen as a more risky investment. If we want to look at
the actual returns these may have created we can look at the patterns and where there are higher or lower rates earlier in the investment these will have a compounding
impact over the term of the investment (Watts, 1996). We can demonstrate this by taking a example investment of 100 and looking at its progress over the period assuming each
value is at the end of the year and based on compound growth. Return X Return Y 1997 116.50 117.50 1998 133.04 133.01 1999 151.00 152.30 2000 175.32
175.29 2001 196.70 198.43 2002 219.32 219.27 If we look at this return on X may be slightly higher, despite the fact
that return Y starts out as the higher interest rate. If we look at the variation and the standard division we see that investment rates were more volatile and as
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