(b)The market M and Stock J have the following probability distributions:State of the economyProbabilityRMRJBoom0.315%20%DepressionRecovery0.49%5%0.318%12%Required to(1) Calculate the expected rates of retum for the market and Stock J.(ii) Calculate the standard deviations for the market and Stock J.

Expected rate of return refers to the amount of interest that is received in investment in future.…

(b)The market M and Stock J have the following probability distrībutions: State of the economy Probability RM RJ Вoom 0.3 15% 20% Depression Recovery 5% 12% 0.4 9% 0.3 18% Required to 1) Calculate the expected rates of retum for the market and Stock J. (1) Calculate the standard deviations for the market and Stock J.

(b)The market M and Stock J have the following probability distrībutions: State of the economy Probability RM RJ Вoom 0.3 15% 20% Depression Recovery 5% 12% 0.4 9% 0.3 18% Required to 1) Calculate the expected rates of retum for the market and Stock J. (1) Calculate the standard deviations for the market and Stock J.

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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Similar questions

An engineer prepares a report to evaluate a project using PW and IRR. Just before submitting the report, he spills coffee on it, making the first digit of the 2-digit IRR unreadable. The second digit is a 2. The PW is negative and MARR is 15 percent. He doesn’t have time to redo the analysis. Can you help him figure out the IRR?
2.
Assume the CAPM holds and consider stock X, which has a return variance of 0.09 and a correlation of 0.75 with the market portfolio. The market portfolio's Sharpe ratio is 0.30 and the the risk-free rate is 5%. (a) What is Stock X's expected return? (b) What proportion of Stock X's return volatility (i.e. standard deviation) is priced by the market? Explain why this number is less than 1.
1. Determine the expected return and the variance of the portfolio formed by the two assets S₁, S₂ with weights ₁ = 0.6, x2 = 0.4. The assets returns are described by the following scheme: scenario W1 2لا W3 probability 0.1 0.4 0.5 T1 -20% 0% 20% 12 -10% 20% 40%
If you plot the relationship between portfolio expected return and portfolio beta, what is the slope of the line that results? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) | Slope of the line %
Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10% 8% 2 0.20 13% 7% 3 0.20 12% 6% 4 0.30 14% 9% 5 0.20 15% 8% The coefficient of correlation between A and B is:
Given the following probability distribution, what are the expected return and the standard deviation of returns for Security J? State Pi ri 1 0.5 11% 2 0.3 8% 3 0.2 5% O 9.40%; 2.04% O 8.90%; 2.34% O 7.40%; 2.94% O 8.40%; 2.64% O 7.90%; 1.74%
Stock A and B have the following probability distributions of expected future returns: Probability A B 0.1 (20%) (46%) 0.2 7 0 0.4 15 15 0.2 23 30 0.1 47 50 What is the expected rate of return for Stock A? What is the standard deviation of returns for Stock B?
QUESTION 1 Under which of the following scenarios, the minimum variance portfolio that contains two stocks has the smallest standard deviation? OA. The correlation between the two stock returns is -1 OB. The correlation between the two stock returns is -0.2 OC. The correlation between the two stock returns is 0.2 OD. The correlation between the two stock returns is 0.5
pm.2
Supposing the return from an investment has the following probability distribution Return Probability R (%) 8 0.2 10 0.2 12 0.5 14 0.1 Required: What is the expected return of the investment? What is the risk as measured by the standard deviation of expected returns?
Stock A has a correlation with the market of 0.53. Assuming that the standard deviation of returns for Stock A is 24.0% and that the standard deviation of returns for the market is 10.0%, what is beta for stock A? A 1.31 B. 1.27 C. 0.17 D. 0.22

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