Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession 0.20 -4% 19% Normal economy 0.40 20% 9% Boom 0.40 26% 8% a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? O No O Yes b. Calculate the expected rate of return and standard deviation for each investment. (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.) Expected Rate of Return Standard Deviation Stocks % Bonds % % E. Which investment would you prefer? Stock Bond Which investment would you prefer?

Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession 0.20 -4% 19% Normal economy 0.40 20% 9% Boom 0.40 26% 8% a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? O No O Yes b. Calculate the expected rate of return and standard deviation for each investment. (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.) Expected Rate of Return Standard Deviation Stocks % Bonds % % E. Which investment would you prefer? Stock Bond Which investment would you prefer?

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: State of Economy Recession Normal Boom Probability of State of Expected return Economy .17 .53 .30 Portfolio Return if State Occurs -.13 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.) % 14 .22
4. An investor anticipates the following forecasted returns in three scenarios for two stocks and the market index: Scenario Probability M A B Recession Stagnation Growth a. Compute the expected return and risk of A and B. 0.2 6% 10% 4% 0.5 10% 12% 8% 0.3 20% 24% 16% b. Compute the beta coefficients and the return at equilibrium given a risk-free rate of 5%. c. Compute the expected return and risk on a portfolio composed of A and B in proportions of 30% and 70%.
Consider the following scenario analysis: Scenario Recession Normal economy Boom Rate of Return Probability Stocks Bonds 0.20 -6% 17% 0.60 19% 9% 0.20 30% 5% a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? b. Calculate the expected rate of return and standard deviation for each investment. c. Which investment would you prefer? × Answer is not complete.
Suppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.50 0.160 Repete Co. 1.19 0.133 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations. Round the final answers to 2 decimal places.) Expected Return on Market Pete Corp. % Repete Co. % What is the risk-free rate? (Do not round intermediate calculations. Round the final answer to 3 decimal places.) Risk-free rate
Consider the following multifactor (APT) model of security returns for a particular stock. Factor Risk Premium 8% 9 7 Factor Inflation Industrial production Oil prices Factor Beta 1.1 0.6 0.3 a. If T-bills currently offer a 7% yield, find the expected rate of return on this stock if the market views the stock as fairly priced. (Do not round intermediate calculations. Round your answer to 1 decimal place.) X Answer is complete but not entirely correct. Expected rate of return 19.0 X %
hi there, i need answer for a and b. thankssss
Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession 0.30 -7% 18% Normal economy Boom 0.60 20% 0.10 26% 10% 3% a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? b. Calculate the expected rate of return and standard deviation for each investment. c. Which investment would you prefer? Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate the expected rate of return and standard deviation for each investment. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place. Expected Rate of Return Stocks 12.5% Bonds 11.7 % Standard Deviation % %
The payoff table below indicates the returns (in RM thousands) of investments in stock, bond and fixed deposit under different economic situations. Type of Investment Stock Bond Fixed Deposit Table 1 Economic Situation Good 150 50 45 Stable 60 40 45 Poor -30 36 45 The probabilities of good, stable and poor economy are 0.3, 0.5 and 0.2, respectively. What is the best investment based on the expected monetary value criterion? Draw a decision tree.
37. An analyst developed the following probability distribution of the rate of return for a common stock: Rate of return Scenario Recession -0.05 0.10 0.25 What's the standard deviation of the rate of return? Show your calculations. n k=ZkP |o= i=1 A. 0.0549. B. 0.0649. Normal Boom . 0.0749. D. 0.0849 E. 0.0949. 건 Probability 0.20 0.60 0.20 i-1 (k₂ − Ê)² P₂.
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Consider the following scenario analysis: Rate of Return Stocks Scenario Bonds Probability 0.20 Recession -6% 18% Normal economy 0.50 19% 11% Boom 0.30 26% 8% a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? O No Ⓒ Yes b. Calculate the expected rate of return and standard deviation for each investment. (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.) Expected Rate of Standard Deviation Return Stocks 16.1 % % Bonds 9.7 % % c. Which investment would you prefer? Bond Which investment would you prefer? Stock

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