a. what is return on each of the three shortlisted stock? and what is the standard deviation of the rate of return on the three shortlisted stocks?
a. what is return on each of the three shortlisted stock? and what is the standard deviation of the rate of return on the three shortlisted stocks?
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. what is return on each of the three shortlisted stock? and what is the standard deviation of the
Transcribed Image Text:There are many possible reasons for why companies aren't spending more given their vast
reserves, one of which is that they're simply waiting for the right time.
"I think acquisitions are something all of these companies are thinking about as we get further
along in the cycle and they look for ways to keep their top-line growth accelerating," Nomura
analyst Christopher Eberle told CNBC.
Tech companies especially like to sit on cash, Evercore's Lee Horowitz said, to keep "dry powder
as a way to weather cyclical downturns" and to take advantage of market pullbacks to pick up
assets.
your interview for a summer position at Facebook, you hear from Joe Schmidt, their HR partner,
that they are looking for a person with an understanding of the risk and
investments. You ably talk about the risk-return of your own portfolio and proudly show him the
marks you got in my course. You are hired! Now comes the difficult part. You find out that their
top financial Analyst Stev Byen has been given the task of investing some of this excess cash, and
you have been hired to assist him. Stev has shortlisted three stocks. He has also carefully
In
eturn to financial
formulated an outlook for the US economy in these COVID times: the probabilities of the three
possible scenarios are 70% for Recession, 20% for Normal, and 10% for Boom. He has chosen 2
low beta stocks as he feels that it will be prudent to invest in low-beta (beta value less than 1 but
greater than zero) stocks as these stocks will be less exposed to market movements. To leave room
for some gain, he has also chosen a high beta stock. The table below shows the returns on the
shortlisted stocks in each of the three scenarios:
Transcribed Image Text:Rate of Return, %
Scenario
La-Z-Boy Inc.
Wynn Resorts
Sunoco LP
Recession
6.00%
-4.00%
8.50%
Normal
2.00%
17.50%
2.75%
Вoom
1.00%
40.00%
-18.00%
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