Consider the following information:State of EconomyRecessionExpected returnNormal.60Boom20Calculate the expected return for Stock A.Expected returnProbability of State ofEconomyCalculate the expected return for Stock B.Standard deviation208.40%8.02%8.82%7.95%8.74%Standard deviationCalculate the standard deviation for Stock A.10.20%8.33%10.71%9.69%10.61%2.94%2.08%3.09%2.79%3.06%Calculate the standard deviation for Stock B.17.42%12.32%18.29%16.55%18.11%Rate of Return if StateOccursStock A.03.0912Stock B-.21N1333

State of EconomyProbability of state of EconomyProject' A ReturnProject' B…

Consider the following information: State of Economy Recession 20 Normal .60 Boom 20 Calculate the expected return for Stock A. Expected return Expected return Probability of State of Economy Calculate the expected return for Stock B. Standard deviation 8.40% 8.02% 8.82% 7.95% 8.74% Standard deviation 10.20% 8.33% Calculate the standard deviation for Stock A. 10.71% 9.69% 10.61% 2.94% 2.08% 3.09% 2.79% 3.06% Calculate the standard deviation for Stock B. 17.42% 12.32% 18.29% 16.55% 18.11% Rate of Return if State Occurs Stock A .03 .09 12 Stock B -.21 13 33

Consider the following information: State of Economy Recession 20 Normal .60 Boom 20 Calculate the expected return for Stock A. Expected return Expected return Probability of State of Economy Calculate the expected return for Stock B. Standard deviation 8.40% 8.02% 8.82% 7.95% 8.74% Standard deviation 10.20% 8.33% Calculate the standard deviation for Stock A. 10.71% 9.69% 10.61% 2.94% 2.08% 3.09% 2.79% 3.06% Calculate the standard deviation for Stock B. 17.42% 12.32% 18.29% 16.55% 18.11% Rate of Return if State Occurs Stock A .03 .09 12 Stock B -.21 13 33

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Problem 8.06 (Expected Returns) Stock A and Bs have the following profitability distributions of expected future returns's Profitability 0.1 0.1 0.5 0.2 0.1 A (890) 니 16 18 31 B (20%) 0 20 27 37 a) Calculate the expected rate of return, FB, for stock B3 (FA= 14,30%) b) Calculate the standard denation of expected returns, OA, for stock A (OB = 15.18% 2 Now calculate the coefficient of variation for stock B. C) Assume the risk-rate is 1.5% What are the Sharpe rutius for Stacks A and B? Stock A. Stock Bi
What is the standard deviation of stock A if it has the following probabilities and rate of returns. Probability Return 0.3 -5% 0.4 14% 0.3 11% a. 9.11% b. 9.40% c. 8.62% d. 8.21%
Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Recession 0.30 0.05-0.15 Normal 0.55 0.15 0.15 Boom 0.15 0.20 0.35 Calculate the expected return for the two stocks.
Consider information given in the table below and answers the question asked thereafter: State Probability return on stock A Return on stock B A 0.15 10% 9% B 0.15 6% 15% C 0.10 20% 10% D 0.18 5% -8% E 0.12 -10% 20% F 0.30 8% 5% Calculate covariance and coefficient of correlation between the returns of thestocks A and B.v. Now suppose you have $100,000 to invest and you want to a hold a portfoliocomprising of $45,000 invested in stock A and remaining amount in stock B.Calculate risk and return of your portfolio.
Consider the following probability distribution for stocks A and B: State Return on Stock A 1 10% 2 13% 3 12% 4 14% 5 15% 0.46. The coefficient of correlation between A and B is 0.60. 0.58. 1.20. Probability 0.10 0.5. 0.20 0.20 0.30 0.20 Return on Stock B 8% 7% 6% 9% 8%
Given the following information below for Stock A, calculate its standard deviation 6. Where: wwwww pi Probability of some state į a (R-R)'xp mean il Ri = Expected return in state į Rmsa Expected return Economic State i pi Probability of some statei Ri= Expected return in statei Weighted Ri for each State .39 22% Вoom Normal 11% 60 Bust 21 3% Rmean (Sum Column for Stock A Expected Returnl Bring the answer you calculated for Rmean Expected return above and enter it in the correct column below the finish calculating the Standard Deviation. (Ri-Rmean* x pi State i (Ri-Rmean) (Ri - Bmean) pi= Ri = Rmean= 22% 39 Boom Normal 60 11% Bust 3% 21 Sum of Column = Variance) = Square Root of Variance Standard Deviation
Stock A Stock BRate of Return Probability Rate of Return Probability14 0.15 20 0.2016 0.20 18 0.1817 0.30 16 0.3219 0.15 14 0.1420 0.20 10 0.16 a. Calculate the expected return for both stock A and stock B b. Calculate the standard deviation for both stock A and stock B c. Calculate the coefficient of variation for both stock A and stock B.
Subject: Financial strategy & policy 8-1: EXPECTED RETURN A stock’s returns have the following distribution: Demand for theCompany’s Products Probability of ThisDemand Occurring Rate of Return If ThisDemand Occurs Weak 0.1 (50%) Below average 0.2 (5) Average 0.4 16 Above average 0.2 25 Strong 0.1 60 1.0 Calculate the stock’s expected return, standard deviation, and coefficient of variation.
Which of the following statement(s) is(are) true? 1) The real rate of interest is determined by the supply and demand for funds. II) The real rate of interest is determined by the expected rate of inflation. III) The real rate of interest is unaffected by actions of the Fed. IV) The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation. III and IV only. I only. OII and III only. O, II, III, and IV only. OI and III only.
Consider the following information: State of Probability of Economy State of Economy .17 .43 .33 .07 Boon Good Poor Bast Stock A a. Expected return b. Variance c. Standard deviation 11.70% 0.00120 3.40 .352 Answer is complete but not entirely correct. 122 012 -.112 % Rate of Return if State Occurs Stock B a. Your portfolio is Invested 32 percent each in A and C and 36 percent in B. What is the expected return of the portfolio? Note: Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the variance of this portfolio? Note: Do not round Intermediate calculations and round your answer to 5 decimal places, e.g., .16161. c. What is the standard deviation of this portfolio? Note: Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. .452 .102 .022 -.252 Stock C .332 .172 -.052 -.092
Expected Returns: Discrete Distribution The market and Stock J have the following probability distributions: Probability rM rJ 0.3 15% 20% 0.4 9 7 0.3 18 10 Calculate the expected rates of return for the market and Stock J. Round your answers to one decimal place. Expected rate of return (Market): % Expected rate of return (Stock J): % Calculate the standard deviations for the market and Stock J. Do not round intermediate calculations. Round your answers to two decimal places. Standard deviation (Market): % Standard deviation (Stock J): %
Suppose your expectations regarding the stock price are as follows: State of the Market Boom Normal growth Recession Probability Ending Price 0.26 $ 140 0.25 110 0.49 80 Use the equations E (r) = Ep (s) r(s) and o² = Ep (s) [r(s) — E(r)]² to compute the mean and standard deviation of the HPR on - S S Mean Standard deviation HPR (including dividends) 55.0% 21.0 -16.0 stocks. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. % %

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS