Consider the following information:State of EconomyRecessionExpected returnNormal.60Boom20Calculate the expected return for Stock A.Expected returnProbability of State ofEconomyCalculate the expected return for Stock B.Standard deviation208.40%8.02%8.82%7.95%8.74%Standard deviationCalculate the standard deviation for Stock A.10.20%8.33%10.71%9.69%10.61%2.94%2.08%3.09%2.79%3.06%Calculate the standard deviation for Stock B.17.42%12.32%18.29%16.55%18.11%Rate of Return if StateOccursStock A.03.0912Stock B-.21N1333

State of EconomyProbability of state of EconomyProject' A ReturnProject' B…

Consider the following information: State of Economy Recession 20 Normal .60 Boom 20 Calculate the expected return for Stock A. Expected return Expected return Probability of State of Economy Calculate the expected return for Stock B. Standard deviation 8.40% 8.02% 8.82% 7.95% 8.74% Standard deviation 10.20% 8.33% Calculate the standard deviation for Stock A. 10.71% 9.69% 10.61% 2.94% 2.08% 3.09% 2.79% 3.06% Calculate the standard deviation for Stock B. 17.42% 12.32% 18.29% 16.55% 18.11% Rate of Return if State Occurs Stock A .03 .09 12 Stock B -.21 13 33

Consider the following information: State of Economy Recession 20 Normal .60 Boom 20 Calculate the expected return for Stock A. Expected return Expected return Probability of State of Economy Calculate the expected return for Stock B. Standard deviation 8.40% 8.02% 8.82% 7.95% 8.74% Standard deviation 10.20% 8.33% Calculate the standard deviation for Stock A. 10.71% 9.69% 10.61% 2.94% 2.08% 3.09% 2.79% 3.06% Calculate the standard deviation for Stock B. 17.42% 12.32% 18.29% 16.55% 18.11% Rate of Return if State Occurs Stock A .03 .09 12 Stock B -.21 13 33

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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Similar questions

A 133.
Stock W has the following returns for various states of the economy: Compute standard deviation for this stock. State of the Economy Probability Stock W's Return Recession 10% -30% Below Average 20% -2% Average 40% 10% Above Average 20% 18% Boom 10% 40%
QUESTION 2 The following table contains data on the returns of stock A and stock B from 2021 to 2024: Year 2021 2022 2023 2024 Return on stock A 6 8 10 12 Return on stock B 13 10 14 11 1. Compute the mean return on stock A and the mean return on stock B; 2. Compute the variance of the return on stock A and the variance of the return on stock B; 8. Compute the standard deviation of the return on stock A and the standard deviation of the return on stock B; 4. Compute the coefficient of variation of the return on stock A and stock B; 5. Compute RRC for stock A and stock B (Hint: RRC = Mean Return/Standard Deviation); 6. Would you invest in Stock A or Stock B? Why?
Suppose your expectations regarding the stock market are as follows: State of the Economy Boom Normal growth Recession Probability 0.3 0.6 0.1 Mean Standard deviation HPR 24.90 % % 41% 24 E (r) E-1P(s)r (s) Var (r) = o² = s-1p(s)[r (s) - E(r)]² SD (r) = o = √Var (r) Required: Use above equations to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculation Round your answers to 2 decimal places.) -18 K
Return rate
Problem 9-21 Risk, Return, and Their Relationship (LG9-3, LG9-4)Consider the following annual returns of Estee Lauder and Lowes Companies: Estee LauderLowes CompaniesYear 123.9%6.0%Year 224.016.6Year 318.14.7Year 450.444.0Year 517.314.0Compute each stocks average return, standard deviation, and coefficient of variation.Note: Round your answers to 2 decimal places.
Forecasted returns for Stock A: State of the Economy Prob. of State Return in State Prosperity 35% 5% Normal 45% 14% Recession 20% -3% What is the standard deviation of the stock’s returns?
vv.2
% 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 7 16.9 20.7 19.6 15 Variance (%) ^2 0 549.09 244.124 358.04 313.6 Standard Deviation 0 23.4326695 15.6244712 18.92194493 17.7087549 Coefficient of Variation 0 1.386548491 7.54805372 0.965405354 1.18058366 Covariance wit MP 0 .0413 -.0275 .0231 .0314 Correlation with Market Index 0 0.9953 -0.9953 0.6894 1.0000 Beta 0 1.32 - 0.88 0.74 1.00 CAPM Req. Return 7.00 % 17.54 % -0.02% 12.89% 15.00% Valuation ( Overvalued / Undervalued/Fairly Valued) Valued Fairly…
Stock A has the following returns for various states of the economy: State of the Economy Probability Stock A's Return Recession 10% -.30 Below Average 20% -.02 Average 40% .10 Above Average 20% .18 Boom 10% .40 Stock A's expected return is A. 7.2% B. 9.6% C. 5.4% D. 8.2%
8 Consider the following information on Stocks I and II: State of Economy Recession Normal Irrational exuberance a. Beta Standard deviation Probability of State of Economy .28 .63 .09 b. Beta The market risk premium is 11.3 percent, and the risk-free rate is 4.3 percent. a. Calculate the beta and standard deviation of Stock I. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. b. Calculate the beta and standard deviation of Stock II. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers 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 "riskier"? Rate of Return if State Occurs Stock I Stock II Standard deviation c. Most systematic risk d. Most unsystematic risk e. "Riskier" stock .035 .335 .195 % -.23 .15 .43 %
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