11-2 What is the expected return of the following investment?Expected ReturnProbabilityPayoff30.0%0.30.210.0-2.00.5

Expected return of an investment is calculated as below: Please refer to the excel:

Answered: 11-2 What is the expected return of the…

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

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A. 6.36 The four alternatives described below are being evaluated. This question has three parts Part 2: If the proposals are mutually exclusive, which one should be selected at a MARR of 14.5% per year? Incremental Rate of Return, %, When Compared with Alternative Overall Initial Alternative Rate of A Investment, $ Return, % -60,000 11.7 -90,000 22.2 43.3 C -140,000 17.9 22.5 10.0 D -190,000 15.8 17.8 10.0 10.0 O B O A O C OD
30- If an investment is producing an internal rate of return that is equal to therequired return, the Net Present Value of the project will be ____ and theProfitability Index of the project will be ______. a. Negative; Greater than oneb. Negative; Onec. Zero; Oned. Positive; Onee. Positive; Greater than onef. Zero; Less than one
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The portfolio of 50% Project A and 50% project B offers and offers a way of earning a more stable return than either a total investment in project A or project B. time 1 9 True False 10 Returns on Project A 2 3 57.00% 4 19.00% 5 70.00% 6 25.00% 7 39.00% 8 42.00% -23.00 % -32.00 % 39.00% 122.00 % Returns on Project B -23.40% -73.20% -34.20% -11.40% -42.00% -15.00% -23.40% -25.20% 13.80% 19.20%
E (R) 15.5% 5% 1.5 SML B (a) What is the Expected Return for a security with a Beta of 1.2?
Q1. The required return is 12%. What is the present value for the cash flows below PV = ? 30 30 30 30 30 1 6. 30
How to find the minimum certainty equivalent adjustment? PV cash flow at 10% PV: 122,891 Net: 2,891 i: 10
You are considering investing in a project with the following possible outcomes: Probability of Investment States Occurrence Returns State 1: Economic boom 18% 20% State 2: Economic growth 42% 16% State 3: Economic decline 30% 3% State 4: Depression 10% -25% Calculate the expected rate of return and standard deviation of returns for this investment, respectively. O 7.35%, 12.99% O2.18%, 1.69% O 8.72%, 12.99% O3.50%, 1.69%
15. Consider the following possible returns over the next year on an asset.Return Probability–£40 0.5£40 0.5What is the standard deviation of return of the asset.
If the risk free rate is 4% and the risk premium is 10, and beta is 1 what is the required rate of return? 0-6% 5% 14% 6%

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11-2 What is the expected return of the following investment? Expected Return Probability Payoff 30.0% 0.3 0.2 10.0 -2.0 0.5