Consider the following information about the various states of economy and the returns of various investment alternatives for each scenario. Answer the questions that follow. % Return on T-Bills, Stocks and Market Index State of the Economy Probability T- Phillips Pay- Rubber- Market Bills up made Index Recession 0.2 7 -22 28 10 -13 Below Average 0.1 7 -2 14.7 -10 1 Average 0.3 7 20 0 7 15 Above Average 0.3 7 35 -10 45 29 Boom 0.1 7 50 -20 30 43 Mean Standard Deviation Coefficient of Variation Covariance with MP Correlation with Market Index Beta CAPM Req. Return Valuation (Overvalued/Undervalued/Fairly Valued) Nature of stock (Aggressive/Defensive) Question 1 Fill the parts in the above table that are shaded in yellow. You will notice that there are nine line items.
Consider the following information about the various states of economy and the returns of
various investment alternatives for each scenario. Answer the questions that follow.
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% Return on T-Bills, Stocks and Market |
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Index |
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State of the Economy |
Probability |
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Phillips |
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Pay- |
Rubber- |
Market |
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Bills |
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up |
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made |
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Index |
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Recession |
0.2 |
7 |
-22 |
28 |
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-13 |
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Below Average |
0.1 |
7 |
-2 |
14.7 |
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-10 |
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Average |
0.3 |
7 |
20 |
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15 |
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Above Average |
0.3 |
7 |
35 |
-10 |
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45 |
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29 |
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Boom |
0.1 |
7 |
50 |
-20 |
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30 |
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43 |
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Mean |
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Standard Deviation |
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Coefficient of Variation |
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Covariance with MP |
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Correlation with Market Index |
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Beta |
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Valuation |
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(Overvalued/Undervalued/Fairly |
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Valued) |
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Nature of stock |
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(Aggressive/Defensive) |
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Question 1
Fill the parts in the above table that are shaded in yellow. You will notice that there are nine
line items.
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