Considering the following information for stock K and stock M. Probability of state of economy State of economy Boom Normal Recession 0.5 0.2 1) What is the expected return for stock K? For Stock M? ii) What is the standard deviation for Stock K" For stock M? iii) What is the coefficient of variation for Stock K? For stock M2 Rate of return if state occurs K 25% 15% -12% M 18% 4% 0%

Considering the following information for stock K and stock M. Probability of state of economy State of economy Boom Normal Recession 0.5 0.2 1) What is the expected return for stock K? For Stock M? ii) What is the standard deviation for Stock K" For stock M? iii) What is the coefficient of variation for Stock K? For stock M2 Rate of return if state occurs K 25% 15% -12% M 18% 4% 0%

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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Shepherd's Flock stock is expected to produce the following returns given the various states of the economy. What is the expected return on this stock? State of economy Probability of State of Economy Rate of Return Recession .3 -.27 Normal .65 .16 Boom .05 .35
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Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A Stock B Stock C Boom .15 .35 .45 .27 Good .55 .16 .10 .08 Poor .25 -.01 -.06 -.04 Bust .05 -.12 -.20 -.09 a) Your portfolio is invested 40 percent each in A and C, and 20 percent in B. What is the expected return of the portfolio? b) What is the variance of this portfolio? The standard deviation? Stock C .45 .27 .10 .08 -.06 -.04 -.20 -.09
An investor is considering the purchase of Gryphon stock, which has returns given in the table below. Scenario Recession Normal Boom Enter your answers below. E(r) = Number Probability Std. Dev. = Number 0.23 0.41 10.36 Calculate the expected return and standard deviation of Gryphon. Round your answers to 2 decimal places. % Rate of Return 2% 6% 8% %
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Consider the following information: State of Probability of Economy State of Economy Boom Bust .58 .42 Rate of Return if State Occurs Variance Stock A .07 .16 Stock B 15 .06 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return 12.87% % Stock C 33 -.06 b. What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., 32.161616.) 1.29% *
es Consider the following information on three stocks: State of Economy Boom Normal Bust Probability of State of Economy .20 .40 .40 Rate of Return If State Occurs Stock A .34 .25 .03 Stock B .46 .23 -.25 Stock C .50 .20 - .42 a-1. If your portfolio is invested 35 percent each in A and B and 30 percent in C, what is the portfolio expected return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .32161.) a-3. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the expected T-bill rate is 4.50 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations abd enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. If the expected inflation rate…
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Listed below is the return probability distribution associated with the stocks of XYZ Company and the market portfolio under different states of the economy: State Recession Normal Boom 0.00452 O 0.00552 0.00652 Probability O 0.00752 0.4 0.3 0.3 XYZ Return What is the covariance between XYZ return and Market return? -3% 14% 20% Market Return 2% 8% 16%
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