A stock will have a loss of 11 percent in a bad economy, a return of 10.8 percent in a normal economy, and a return of 24.7 percent in a hot economy. There is 32 percent probability of a bad economy, 37 percent probability of a normal economy, and 31 percent probability of a hot economy. What is the variance of the stock's returns? Round your final answer to at least 4 decimal places.
A stock will have a loss of 11 percent in a bad economy, a return of 10.8 percent in a normal economy, and a return of 24.7 percent in a hot economy. There is 32 percent probability of a bad economy, 37 percent probability of a normal economy, and 31 percent probability of a hot economy. What is the variance of the stock's returns? Round your final answer to at least 4 decimal places.
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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Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
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Transcribed Image Text:A stock will have a loss of 11 percent in a bad economy, a return of 10.8 percent in a normal economy, and a return of 24.7 percent in a
hot economy. There is 32 percent probability of a bad economy, 37 percent probability of a normal economy, and 31 percent probability
of a hot economy. What is the variance of the stock's returns? Round your final answer to at least 4 decimal places.
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