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 States of Economy Probability T-Bills Phillips Pay-up Rubber-Made Market 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 Variance (%) ^2 Standard Deviation Coefficient of Variation Covariance wit 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 except the Probability column. You will notice that there are nine line items.
Consider the following information about the various states of economy and the
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% Return on T-Bills, Stocks and Market Index
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States of Economy |
Probability |
T-Bills |
Phillips |
Pay-up |
Rubber-Made |
Market Index |
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Recession |
0.2 |
7 |
-22 |
28 |
10 |
-13 |
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Below Average |
0.1 |
7 |
-2 |
14.7 |
-10 |
1 |
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Average |
0.3 |
7 |
20 |
0 |
7 |
15 |
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Above Average |
0.3 |
7 |
35 |
-10 |
45 |
29 |
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Boom |
0.1 |
7 |
50 |
-20 |
30 |
43 |
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Mean |
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Variance (%) ^2 |
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Standard Deviation |
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Coefficient of Variation |
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Covariance wit MP |
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Correlation with Market Index |
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Beta |
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Valuation ( Overvalued / Undervalued/Fairly Valued) |
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Nature of Stock (Aggressive/Defensive |
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Question 1 Fill the parts in the above table except the Probability column. You will notice that there are nine line items.
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