Consider the following information:Rate of Return If State OccursState of Probability ofState ofEconomyEconomyStock AStock BRecession.22.07-22Normal.52.10.07Boom.26.15.24a. Calculate the expected return for Stocks A and B. (Do not round intermediatecalculations and enter your answers as a percent rounded to 2 decimal places, e.g.,32.16.)

Expected Return Expected return of an investment is calculated by multiplying the expected value of…

Consider the following information: Rate of Return If State Occurs State of Probability of State of Economy Stock A Stock B Economy Recession .22 .07 -22 .52 .26 Normal .10 .07 Вoom .15 .24 a. Calculate the expected return for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Consider the following information: Rate of Return If State Occurs State of Probability of State of Economy Stock A Stock B Economy Recession .22 .07 -22 .52 .26 Normal .10 .07 Вoom .15 .24 a. Calculate the expected return for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

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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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…
Consider the following information: Rate of return State of Economy Probability Stock A Stock B Recession 0.30 -40% 6% Normal 0.50 18% 4% Воom 0.20 142% 2% [Note: take full decimal places in the middle steps and round your FINAL answer to 2 decimal places (i.e. S1.23 or 1.23%)] (a) Calculate the expected return for the two Stocks A and B respectively. (in %) (b) Calculate the standard deviation for the two Stocks A and B respectively. (in %) (c) If you have $2 million to invest in a stock portfolio and your goal is to create a portfolio with an expected return of 16.92%, how much money will you invest in Stock A and Stock B respectively? (d) Based on your answer in part (c), calculate the standard deviation for the portfolio. (in %) (e) If enough stocks (i.e. 100 randomly selected stocks) had been included in the portfolio, what happen to the standard deviation for the portfolio? Explain. [within 100 words]
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Vijay
Consider the following information: State of Economy Probability of State of Economy Boom Bust .68 :32 a. Expected return b. Variance of portfolio Rate of Return if State Occurs Stock A Stock B Stock C .11. .15 .05 .21 .26 -.06 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the variance of a portfolio invested 23 percent each in A and B and 54 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.
Consider the following information about Stocks I and II: Rate of Return if State Occurs Probability of State of State of Economy Recession Economy Stock I Stock Il .25 .06 -.30 Normal .45 .18 .06 Irrational exuberance .30 .12 .45 The market risk premium is 8 percent, and the risk-free rate is 6 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.) The standard deviation on Stock I's return is deviation on Stock II's return is stock's systematic risk/beta, Stock percent, and the Stock I beta is percent, and the Stock II beta is . The standar Therefore, based on the is "riskier".
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. % % %
品 Check my work Consider the following information: Probability of Rate of Return if State Occurs State of Economy Economy Stock A Stock B .050 130 .220 -33 .23 oped Recession .23 Normal .63 Boom .14 .46 Book Hint a. Calculate the expected return for the two stocks. (Do not round interme calculations and enter your answers as a percent rounded to 2 decimal places 32.16.) b. Calculate the standard deviation for the two stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places 32.16.) Print a. Expected return of A Expected return of B b. Standard deviation of A Standard deviation of B Graw **. **** APR 08 F3 F1 F2
Consider the following information: Probability of State of Economy .20 .60 .20 Economy Recession Normal Boom Rate of Return if State Occurs Stock A Stock B .035 .115 .290 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. 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. a. Expected return of A Expected return of B b. Standard deviation of A Standard deviation of B do do do do % % % % -.40 .30 .53
7
Consider the following information: Probability of Rate of Return if State Occurs Economy State of Economy Stock A Stock B Recession .20 .035 -.40 Normal Boom .60 .20 .115 .30 .290 .53 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 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 a. Expected return of A 0.13% Expected return of B 0.21 % b. Standard deviation of A 0.08 % Standard deviation of B 0.32 %

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