A stock's returns have the following distribution:Demand for theProbability of thisRate of Return ifCompany's ProductsDemand Occurring this Demand OccursWeak0.1(24%)Below average0.1(15)Average0.412Above average0.328Strong0.1581.0Assume the risk-free rate is 2%. Calculate the stock's expected return, standard deviation, coefficient of variation, andSharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places.Stock's expected return:%Standard deviation:%Coefficient of variation:Sharpe ratio:

Risk-free rate = 2% Need to compute 1. Stocks expected return 2. Standard deviation 3.…

Answered: A stock's returns have the following…

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 stock's return has the following distribution: Demand for theCompany's Products Probability of ThisDemand Occurring Rate of Return if ThisDemand Occurs (%) Weak 0.1 -20 % Below average 0.2 -8 Average 0.4 17 Above average 0.2 35 Strong 0.1 65 1.0 Calculate the stock’s expected return and standard deviation. Do not round intermediate calculations. Round your answers to two decimal places. Expected return: % Standard deviation: %
2) see picture
A stock's returns have the following distribution: Demand for theCompany's Products Probability of thisDemand Occurring Rate of Return ifthis Demand Occurs Weak 0.1 (28%) Below average 0.1 (10) Average 0.4 12 Above average 0.3 22 Strong 0.1 55 1.0 Assume the risk-free rate is 3%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places. Stock's expected return: % Standard deviation: % Coefficient of variation: Sharpe ratio:
b. Consider the following information about three stocks: Probability of State of i. ii. iii. iv. State of Economy V. Boom Recession Economy 0.40 0.60 From the information given, you are required to answer the following questions. Compute the Standard Deviation for each stock. Compute the Coefficient Variation for each stock. Based on your computation in part (i) and (ii), which stock is riskier? Explain your answer. Rate of Return if State Occurs Stock Hang Stock Hang Jebat 7% 13% Tuah 28% (5%) Stock Hang Kasturi 15% 3% Assume that you have RM14,000 invested in Stock Hang Jebat whose beta is 1.5, RM19,000 invested in Stock Hang Kasturi whose beta is 2.5 and RM17,000 invested in Stock Hang Tuah whose beta is 1.6. Determine what is the beta of this portfolio. Based on your answer in part (iv), compute the required rate of return for this portfolio, given that the market rate of return is 13% and risk-free rate is 5%.
A stock's returns have the following distribution: Demand for the company's probability of this demand product occurring weak below average average above average strong 10% 10% 30% 30% 20% Rate of return if this demand occurs -30% -14% 11% 20% 45% Assume the risk-free rate is 2.8%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. exp return =13.90%, std dev=21.86%, CV=1.57, and sharpe ratio =0.54 exp return = 13.90%, std dev=21.86%, CV=0.57, and sharpe ratio =0.54 exp return = 13.90%, std dev=21.86%, CV=1.57, and sharpe ratio =0.51 exp return =3.90%, std dev=11.86%, CV=2.57, and sharpe ratio =0.59
We know the following expected returns for stocks A and B, given the different states of the economy: State(s) Probability E(rA,s) E(rB,s) Recession 0.1-0.06 0.04 Normal 0.5 0.09 0.07 Expansion 0.4 0.17 0.11 What is the standard deviation of returns for stock B?
Consider the following information on Stocks I and II: Probability of State of Economy State of Economy Rate of Return if State Occurs Stock I Stock II Recession .22 .045 -.37 Normal .62 .355 .29 Irrational .16 exuberance .215 .47 The market risk premium is 11.7 percent, and the risk-free rate is 4.7 percent. a. Calculate the beta and standard deviation of Stock I. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. b. Calculate the beta and standard deviation of Stock II. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is "riskier"? a. Beta Standard deviation b. Beta Standard deviation c. Most systematic risk d. Most unsystematic risk e. "Riskier" stock 1.94 % %
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A stock's returns have the following distribution: Demand for theCompany's Products Probability of thisDemand Occurring Rate of Return ifthis Demand Occurs Weak 0.1 (22%) Below average 0.2 (13) Average 0.3 17 Above average 0.3 39 Strong 0.1 64 1.0 Assume the risk-free rate is 2%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places. Stock's expected return: % Standard deviation: % Coefficient of variation: Sharpe ratio:
A chip manufacturer makes video gaming chip that can be sold for $50. The chip material cost is $15 for each chip. The operations costs of the chip manufacturer (administration etc.) is $100000. The chip manufacturing machinery costs $500000 that is depreciated over 10 years to a salvage value of zero. a) What is the accounting breakeven level of sales in terms of number of chips sold? b) b. What is the NPV breakeven level of sales assuming a tax rate of 35%, 10-year project life and a discount rate of 12%.
Which of the following will (holding everything else constant) cause the price earnings (P/E) ratio of a stock to decrease: The required return increases The risk-free rate decreases The stock's beta decreases The required return decreases

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