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Estimating+Expected+Returns+(Mean)+[Questions]

The document presents a series of questions related to estimating expected returns for stocks, including calculating expected returns from historical prices and using Python functions for analysis. It also discusses methods for converting daily returns to annual returns and evaluates the reliability of expected returns as investment measures. The questions include multiple-choice options to test understanding of these concepts.

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Meli Mayless
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6 views3 pages

Estimating+Expected+Returns+(Mean)+[Questions]

The document presents a series of questions related to estimating expected returns for stocks, including calculating expected returns from historical prices and using Python functions for analysis. It also discusses methods for converting daily returns to annual returns and evaluates the reliability of expected returns as investment measures. The questions include multiple-choice options to test understanding of these concepts.

Uploaded by

Meli Mayless
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Estimating Expected

Returns (Mean)

[Questions]

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1. North Star Inc.’s stock traded at the following prices at the end of
each year. What is the expected return for the stock?
20X1: $94.83
20X2: $106.21
20X3: $113.64
20X4: $106.83
20X5: $110.03
20X6: $125.44

a. 14%
b. 12%
c. 10%
d. 8%
e. 6%

2. For a given set of returns data, Python can help us estimate the
expected return by using which built in function / method?
a. df[‘returns’].average()
b. df[‘returns’].mean()
c. df[‘returns’].expret()
d. df[‘returns’].retexp()
e. df[‘returns’].av()

3. A simple way to convert daily returns to annual returns entails:


a. Multiplying the return by 250
b. Adding the return by 250
c. Dividing the return by 250
d. Subtracting 250 from the return.
e. Raising the return to the power of 250.

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4. A relatively more 'complex' albeit more appropriate way of
annualising daily returns involves...
a. Raising the return to the power of 250.
b. Raising the return to the power of 1 / 250.
c. Raising (1 + r) to the power of 250, minus 1.
d. Raising (1+r) to the power of 250.
e. Raising (1 – r) to the power of 250.

5. Expected returns are extremely reliable measures, representing the


amount of money you can make by investing in a given stock.
a. True
b. False

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