Chapter 13 - Dropbox 2.4 Problem 1: Calculating Expected Return Based on the following information, calculate the expected return: Probability of this Portfolio Return if State of Economy Recession Normal Boom State Occuring State Occurs 10% - 18% 60% 11 % 30 % 26% Create your Original Solution Below - Be sure to show all calculations and clearly indicate answers.

Chapter 13 - Dropbox 2.4 Problem 1: Calculating Expected Return Based on the following information, calculate the expected return: Probability of this Portfolio Return if State of Economy Recession Normal Boom State Occuring State Occurs 10% - 18% 60% 11 % 30 % 26% Create your Original Solution Below - Be sure to show all calculations and clearly indicate answers.

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 25SP: Start with the partial model in the file Ch07 P25 Build a Model.xlsx on the textbook’s Web site....

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Q2 Following are four economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast growth 0.30 60 % Slow growth 0.50 13 Recession 0.15 –15 Depression 0.05 -45 Compute the expected return and standard deviation. (Round your answers to 2 decimal places.) EXPECTED RETURN % STANDARD DEVIATION. %
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Consider the following scenario analysis: Scenario Recession Normal economy Boom. Probability 0.20 Stocks Bonds 0.60 0.20 a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? b. Calculate the expected rate of return and standard deviation for each investment. c. Which investment would you prefer? Expected Rate of Return 1.3% 0.8 % Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate the expected rate of return and standard deviation for each investment. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place. Rate of Return. Bonds 14% 8% 4% Standard Deviation Stocks -5% 15% 25% 15.3 Answer is complete but not entirely correct. % 8.1 % Dequired A Required
Computer the expected return given these three economic states, their likelihoods, and the potential returns. Economic State Probability Return Fast Growth 0.40 25% Slow Growth 0.55 12% Recession 0.05 -50% Multiple Choice ___ -4.3 percent ___ 14.1 percent ___ 19.1 percent ___ 29.0 percent
H3. Compute the standard deviation of the expected return given these three economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast Growth 0.2 30% Slow Growth 0.5 6% Recession 0.3 −2% Please show proper step by step calculation
Consider the following information: Probability of State of Economy Portfolio Return If State Occurs State of Economy Recession 23 -11 Normal .47 .13 Boom 30 .32 Calculate the expected return.
PART ONE Assume that you have the following investment alternatives are at your disposal, shown with their probabilities and associated outcomes. Condition of economy Probability Treasury Bill Nyundo Ltd Mwila Ltd Recession 0.1 8.0% -22% 10% Below average 0.2 8.0% -2% -10% Average 0.4 8.0% 20% 7.0% Above average 0.2 8.0% 35% 45% Boom 0.1 8.0% 50% 30% Required: 1. Compute the correlation coefficient. 2. Construct the security market line. Fill in your answers ONLY in this table. Round answers to 2 decimal places. This table must be submitted (any student who doesn't submit this table with only answers rounded to 2 decimal places will get zero) The Risk Free Rate is 0.5% for every state of the economy. Probability Stock A Stock B Market Portfolio Recession 0.1 -22% 28% -13% Below average 0.2 -2% 14.7% 1% Average 0.4 20% 0% 15% Above average 0.2 35% -10% 29% Boom 0.1 50% -20% 43% ER ? 1.74% 15% Variance () 401.44 ? 235.20 CV ? ? ? Beta (ẞ) 1.3 -0.87 ? S Measure ? ? ? T Measure ? ? ?…
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Start with the partial model in the file Ch07 P25 Build a Model.xlsx on the textbook’s Web site. Selected data for the Derby Corporation are shown here. Use the data to answer the following questions. Calculate the estimated horizon value (i.e., the value of operations at the end of the forecast period immediately after the Year-4 free cash flow). Assume growth becomes constant after Year 3. Calculate the present value of the horizon value, the present value of the free cash flows, and the estimated Year-0 value of operations. Calculate the estimated Year-0 price per share of common equity.
Could part 2 be answered