A stock's returns have the following distribution: % Demand for the Company's Products Weak Below average % Probability of this Demand Occurring 0.1 0.1 0.3 0.3 0.2 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 tw decimal places. Stock's expected return: Standard deviation: Coefficient of variation: Sharpe ratio: Average Above average Strong Rate of Return if this Demand Occurs (20%) (14) 10 36 52

A stock's returns have the following distribution: % Demand for the Company's Products Weak Below average % Probability of this Demand Occurring 0.1 0.1 0.3 0.3 0.2 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 tw decimal places. Stock's expected return: Standard deviation: Coefficient of variation: Sharpe ratio: Average Above average Strong Rate of Return if this Demand Occurs (20%) (14) 10 36 52

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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Consider the following multifactor (APT) model of security returns for a particular stock. Factor Inflation Industrial production Oil prices Expected rate of return Factor Beta 1.8 1.3 0.9 a. If T-bills currently offer a 9% yield, find the expected rate of return on this stock if the market views the stock as fairly priced. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Factor Inflation Industrial production Oil prices Expected rate of return % b. Suppose that the market expects the values for the three macro factors given in column 1 below, but that the actual values turn out as given in column 2. Calculate the revised expectations for the rate of return on the stock once the "surprises" become known. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Expected Value 5% Factor Risk Premium 7% 4 2 10 6 % Actual Value 3% 6 0
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
Consider the following multifactor (APT) model of security returns for a particular stock. Factor Risk Premium 8% 9 7 Factor Inflation Industrial production Oil prices Factor Beta 1.1 0.6 0.3 a. If T-bills currently offer a 7% yield, find the expected rate of return on this stock if the market views the stock as fairly priced. (Do not round intermediate calculations. Round your answer to 1 decimal place.) X Answer is complete but not entirely correct. Expected rate of return 19.0 X %
Consider the following information: State of Probability of Economy State of Economy Boom Bust 0.62 0.38 Rate of Return if State Occurs Stock A 0.09 0.20 Stock B 0.17 0.06 Stock C 0.35 -0.10 6 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Expected return % b. What is the variance of a portfolio invested 20% each in A and B and 60% in C? (Do not round intermediate calculations. Roun the final answer to 6 decimal places.) Variance
dont answer by pen paper
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:
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
An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free rate is 5%, the expected return on the first factor (r₁) is 14%, and the expected return on the second factor (r2) is 8%. If bil 0.5 and bi2 = 0.8, what is Crisp's required return? Do not round intermediate calculations. Round your answer to one decimal place. % =
You've estimated the following expected returns for a stock, depending on the strength of the economy: State (s) Probability Expected return Recession 0.1 -0.05 Normal 0.5 0.06 Expansion 0.4 0.11 What is the expected return for the stock? What is the standard deviation of returns for the stock?
Consider the following information about Stocks I and II: Rate of Return if State Occurs Probability of State of State of Economy Recession Economy Stock I Stock Il .25 .06 -.30 Normal .45 .18 .06 Irrational exuberance .30 .12 .45 The market risk premium is 8 percent, and the risk-free rate is 6 percent. (Do not round intermediate calculations. Enter your standard deviation answers as a percent rounded to 2 decimal places, e.g., 32.16. Round your beta answers to 2 decimal places, e.g., 32.16.) The standard deviation on Stock I's return is deviation on Stock II's return is stock's systematic risk/beta, Stock percent, and the Stock I beta is percent, and the Stock II beta is . The standar Therefore, based on the is "riskier".
Based on the following information, calculate the expected return and standard deviation for Stock A and Stock B. Input area: State Probability Stock A Stock B Recession 0.15 0.04 (0.17) Normal 0.55 0.09 0.12 Boom 0.30 0.17 0.27 (Use cells A6 to D9 from the given information to complete this question.) Output area: Stock A Probability Return Product Return deviation Squared deviation Product Recession Normal Boom B э O Standard deviation Stock B 2 Recession 3 Normal 4 Boom 5 26 Standard Deviation 27 28 E(R) Variance Probability Return Product Return deviation Squared deviation Product E(R) Variance
A stock's returns have the following distribution: Standard deviation: Coefficient of variation: Sharpe ratio: % Demand for the Company's Products Weak Below average % Average Above average Strong Probability of this Demand Occurring 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: 0.1 0.1 0.4 0.3 0.1 1.0 Rate of Return if this Demand Occurs (38%) (11) 15 23 56

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