Consider the following information: State ofEconomyProbability ofState of EconomyRate of Returnif State Occurs Recession.37−.11 Boom.63 .23 Calculate the expected return.

The expected return is the rate of return an asset generates after taking probabilities of different…

Answered: Consider the following information:…

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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es Consider the following information: State of Economy Recession Boom Probability of State of Expected return Economy .28 72 Portfolio Return if State Occurs Calculate the expected return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) -.13 .23 %
The stage in which the economy hits a peak is called: Group of answer choices a. expansion. b. contraction. c. stagnation. d. recession. e. depression.
Consider the following information: \table[[State of,Probability of,\table[[Rate of Return],[if State Occurs]]],[,],[\table[[State of],[Economy]],Stock A,Stock B],[Recession,0.20,0.05,-0.20],[Normal,0.40,0.10,0.10],[Boom,0.40,0.13,0.25]] a. Calculate the expected return for the two stocks. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) \table[[,,],[Expected return for A,,%
Based on the following information, what is the standard deviation of returns? Probability of State of Economy Rate of Return if State of Economy State Occurs Recession .24 -.092 Normal .45 .107 Boom .31 .217
Following are four economic states, their likelihoods, and the potential returns: Economic State Probability 0.31 0.50 0.16 0.03 Fast growth Slow growth Recession Depression Compute the expected return and standard deviation. (Do not round intermediate calculations and round your answers to 2 decimal places.) Expected return Standard deviation Return 78% 15 -18 -49 % %
Consider the following information: State of Probability of Portfolio Return Economy State of Economy If State Occurs Recession <- Boom 21 .79 Expected return Calculate the expected return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 11 .21 %
Suppose your expectations regarding the stock market are as follows: State of the Economy Boom Normal growth Recession E (r) = Σs=1 P(s)r(s) Var (r) = ² = Probability 0.3 0.4 0.3 Σs ₁ p (s)[r (s)- E (r)]² HPR 44% 14 -16 SD (r) = 0 = Var (r) Required: Use above equations to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
H3. Compute the standard deviation of the expected return given these three economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast Growth 0.2 30% Slow Growth 0.5 6% Recession 0.3 −2% Please show proper step by step calculation
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…
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 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 4.13 -275 231 313.60 Correlation with Market Index 0.9953 -0.9953 0.6894 1.0000 Beta 0 1.32…
Calculate the correlation coefficient between X and Y. State Crisis Slow Growth Normal Growth Boom -0.787 -0.878 0.878 O 0.787 Probability 0.1 0.3 0.4 0.2 Return X 10% 7% 3% 1% Return Y -10% -3% 1% 15%
Expected return is,

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State of Economy	Probability of State of Economy	Rate of Return if State Occurs
Recession	.37	−.11
Boom	.63	.23

Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Recession .37 −.11 Boom .63 .23 Calculate the expected return.