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 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.)
Consider the following information on Stocks I and II: State of Economy Recession Normal Irrational exuberance. Probability of State) of Econony 15 .70 .15 a. Stock I beta Stock Il beta. b. Stock I standard deviation Stock Il standard deviation Rate of Return if State Occurs. Stock I Stock II 05 18 07 The market risk premium is 7 percent, and the risk-free rate is 3.5 percent. a. Calculate the beta of each stock. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. Calculate the standard deviation of each stock. c. More systematic nsk d. More unsystematic risk e. "Riskier stock Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is "riskler"? -.21 .10 39 % %
Intro We know the following expected returns for stocks A and B, given different states of the economy: State (s) Probability E(rA.s) E(rB,s) -0.1 0.04 0.08 0.05 0.13 0.07 Recession 0.2 Normal 0.5 Expansion 0.3 Part 1 What is the expected return for stock A? 3+ decimals Submit
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What is the standard deviation of Stock B returns given the information below about its returns across future states of nature? Enter return in decimal form, rounded to 4th digit, as in "0.1234"
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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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.

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