LO1 7.Calculating Returns and Standard Deviations Based on the followinginformation, calculate the expected returns and standard deviations for the twostocks.Page 388State of EconomyRecessionNormalBoomProbability of State Rate of Return if State Occursof EconomyStock AStock B.15-.17.55.12.30.27.04.09.17

Expected rate of return is the profit or loss on the investor that is assumed to be anticipated by…

Calculating Returns and Standard Deviations Based on the following information, calculate the expected returns and standard deviations for the two stocks. Page 388 Probability of State Rate of Return if State Occurs Stock A Stock B .04 -.17 .09 .12 .17 .27 State of Economy of Economy Recession Normal Boom .15 .55 .30

Calculating Returns and Standard Deviations Based on the following information, calculate the expected returns and standard deviations for the two stocks. Page 388 Probability of State Rate of Return if State Occurs Stock A Stock B .04 -.17 .09 .12 .17 .27 State of Economy of Economy Recession Normal Boom .15 .55 .30

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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es Consider the following information on three stocks: State of Economy Boom Normal Bust Probability of State of Economy .20 .40 .40 Rate of Return If State Occurs Stock A .34 .25 .03 Stock B .46 .23 -.25 Stock C .50 .20 - .42 a-1. If your portfolio is invested 35 percent each in A and B and 30 percent in C, what is the portfolio expected return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .32161.) a-3. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the expected T-bill rate is 4.50 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations abd enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. If the expected inflation rate…
Consider the following information about Stocks I and II: State of Economy Recession Normal Irrational exuberance Probability of State of Economy .20 .60 .20 Rate of Return if State Occurs Stock I .04 .26 .10 Stock II -.35 15 .55 The market risk premium is 5 percent, and the risk-free rate is 4 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.)
Review the following market information: Current Stock Market Return 11.25% Current T-Bill Price $979.43 Historic T-Bill Average Return 2.80% Historic Stock Market Average Return 8.10% Stock Beta 1.23 What is the required return (rounded to two places)?
Using the spot and outright forward quotes in the table below, determine the corresponding bid-ask spreads in points. Spot 1.3508 − 1.3524 One-Month 1.3520 − 1.3541 Three-Month 1.3536 − 1.3562 Six-Month 1.3576 − 1.3610
Consider the rate of return of stocks ABC and XYZ. Year 1 2 3 4 ABC XYZ ABC 22% 9 19 1 O ABC Ⓒ XYZ ABC XYZ Required: a. Calculate the arithmetic average return on these stocks over the sample period. (Do not round Intermediate calculations. Round your answers to 2 decimal places.) XYZ 38% 11 19 -11 Arithmetic Average b. Which stock has greater dispersion around the mean return? c. Calculate the geometric average returns of each stock. (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Expected rate of return 11.40 % 11.40 % Geometric Average Expected rate of return d. If you were equally likely to earn a return of 22%, 9%, 19%, 6%, or 1%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) e. What if the five possible outcomes were those of stock XYZ? (Do not round Intermediate calculations. Round your answers to 2…
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Forecasted returns for Stock A: State of the Economy Prob. of State Return in State Prosperity 35% 5% Normal 45% 14% Recession 20% -3% What is the standard deviation of the stock’s returns?
Consider the following information: Economy Recession Normal Boom Probability of State of Economy .21 .56 .23 Rate of Return if State Occurs Stock A Stock B a. Expected return of A Expected return of B b. Standard deviation of A Standard deviation of B .015 .095 .250 a. Calculate the expected return for the two stocks. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. -.36 .26 .49 b. Calculate the standard deviation for the two stocks. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. % % %
Consider the following data State of Nature Prob. Stock A Return Boom 0.3 16.00% Normal 0.6 14.20% Recession 0.1 8.00% What is the expected return for Stock A? Group of answer choices 14.12% 12.14% 15.12% 14.00%

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