Economy Probability Stock A Stock BRecession-30%-20%10%5%40%15%AverageBoomWhat is the standard deviation of Stock A?18.8%24.9%12.9%0.250.500.2520.0% In general, portfolio risk isO Greater; increasesLess; increasesO Greater: decreasesO Less: decreasesthan stand-alone risk because diversificationrisk.

Formula for standard deviation in every state of economy is SD =(A-A bar)2*P where A=Return of stock…

Answered: Economy Probability Stock A Stock B…

Economy Probability Stock A Stock B Recession -30% -20% 10% 5% 40% 15% Average Boom 0.25 0.50 0.25 What is the standard deviation of Stock A?

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

See similar textbooks

Related questions

Q: State of the Economy Probability Stock W's Return Recession 0.1 -36% Below Average 0.2 -15% Average…

A: The question relates to portfolio management and requielred to calculate the expected return,…

Q: Return if State Occurs Probability of State State of Economy Stock A Stock B Bust .10 -.12 -.05…

A: The table is: State of economy Probability of state Stock A Stock B Bust 0.1 -0.12 -0.05…

Q: Review the following market information: Current Stock Market Return 11.25%…

A: The Capital Asset Pricing Model is a model that describes the relationship between the expected…

Q: 14. Given the following information, what is the standard deviation for this stock? State of Economy…

A: Standard deviation of stock is computed as follows:-Standard deviation of stock = whereR= return of…

Q: Input area: State Probability Stock A Stock B Recession 0.15 0.04 (0.17) Normal 0.55 0.09 0.12 Boom…

A: The expected return of a stock is calculated by multiplying each possible return by the probability…

Q: Earns the median salary for a museum curator, $50,000. Is 40 years old and hasn't started saving for…

A: First, we need to calculate how much income Lucia would need in retirement to maintain 72% of her…

Q: Calculate the expected return for the two stocks. Note: Do not round intermediate calculations and…

A: The expected rate of return is the average amount of interest that investing in stock provides while…

Q: Consider the following stocks. Stock Expected return Std. Deviation Beta A 15.9% 27.8% 0.93…

A: Sharpe ratio = (Expected return - Risk free rate of return) / Standard deviation

Q: Stock X Rate of Return (r) Probability (p) Optimistic 14 % 26 % or 0.26 The Economic Most Likely…

A: Given Data: Rate of return(r) Probability(p) 14% 0.26 11% 0.70 -8% 0.04

Q: Calculate the covariance between the following assets [6] State of the world Probability…

A: Calculation of expected return Probability Stock A Stock B Return Expected return Return…

Q: Review the following market information: Current Stock Market Return 11.25%…

A: The required return is the minimum return an investor expects from a stock. It is calculated by the…

Q: The following is the expected returns and probability information for three stocks and the market.…

A: The details relating to the stock's expected return & Probability information are given below:

Q: I1 12 1 3 1 4 15 '7 1 8 1 9 1 10 1 11 I 12 1 13 1 14 I · 15 9 1 1. 1. Based on the following…

A: Expected return =p1 r1 +p2 r2+p3 r3 Return are taken in percentage to easily calculate. Expected…

Q: State of Economy Probability of State of EconomyStock I Recession Normal Irrational exuberance.10…

A: Systematic risk is associated with uncontrollable risk factors, and its value is determined by Beta.…

Q: Consider the following information: Probability of State Rate of Return if State Occurs…

A: Returns from stock investments depend on market conditions and the market conditions change due to…

Q: beta

A: Formula to calculate portfolio beta is: Portfolio beta = wA*Beta A + wB*Beta B +......+wN*Beta N…

Q: Use the information below to answer the question 52WHi 52WLo Ticker Div Yield% P/E Vol 00s High Low…

A: Dividend yield = Dividend / Close price of stock.1.34% = 0.65 /Close price of stock.Close price of…

Q: Year AT&T Stock Returns Market Index Returns 1 8…

A: Equation for stock return based on market return is constructed in this format: Y = mx +c Y is stock…

Q: Market -10% +10% return Stock A +20 Stock B -20 +20 Stock C -30 +30 Stock D +15 +15 Stock E +50 -20

A: Please see the next step for the solution

Q: Use the following table of information: Stock X Stock Y Expected Return 14% 18% Standard Deviation…

A: Expected return is a way of calculating profit or loss anticipated by an investor on his investment…

Q: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B…

A: d) Expected return of the portfolio:(Ba×Pa)+(Bb×Pb)Where,Ba=Beta of stock A Bb=Beta of stock…

Q: Assets ($) 2019 2018 2017 Cash on Hand & at Banks 1844388 2907252 3696201 Accounts Receivable Net…

A: 2018 2019 Times interest earned EBIT EBIT Interest expense Interest expense -41,69,203…

Q: Problem 1 Consider the following information about three stocks: Rate of Return if State Occurs…

A: Expected return can be referred to as the return that can be found by adding up each stock return…

Q: Bear Market Normal Market Bull Market Probability 0.2 0.5 0.3 Stock X’s return -25% 10%…

Q: Considering the following information for stock K and stock M. Probability of state of economy State…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: Scenario 1 Scenario 2 Scenario 3 Scenario 4 Probabil ity 10.0% 25.0% 30.0% 20.0% Rate of Return…

A: Correlation coefficient between two stocks is a standardized measure of comovement of return.

Q: Probability of State of Economy State of Economy Recession .20 Normal .50 Boom .30 Iculate the…

A: Returns from stock investments depend on market conditions and the market conditions change due to…

Q: stock's returns have the following distribution: emand for the Probability of This ompany's Products…

A: The stock's expected return is the return anticipates on investment by the investor, it can be in…

Q: F G H Monthly Monthly Еxcess Excess return for Market Stock 1 Returns 0.09 0.03 -0.07 0.01 0.02 0.02…

A: Risk and return are two main components of investment. Beta a measure which shows the degree of risk…

Q: A stock's returns have the following distribution: Probability Rate of Return 0.1 -25% 0.2 0.4 0.2…

A: To calculate the coefficient of variation, we first determine the expected return, followed by…

Q: You have been given this probability distribution for the holding-period return for KMP stock: HPR…

A: economy probability HPR boom 0.3 18% normal 0.5 12% recession 0.2 -5%

Q: economic state stock A stock B depression -0.20…

A: Since you have not mentioned the specific question we will just answer the first question in case…

Q: Expected return

A: Expected Return is the amount of loss or profit an investor expects to receive on an investment. It…

Q: State of Economy Recession Normal Boom Probability of State of Economy 15 .56 .29 Stock A .06 .09 14…

A: The expected rate of return is the average amount of interest that investing in stock provides while…

Q: EXPECTED RETURN A stock's returns have the following distribution: Probability of Being in This…

A: Working note:

Q: The return of stock B is __% The volatility of stock A is __% The volatility of stock B is __%

A: Thank you for posting questions. Since you have posted multiple questions, as per the guideline I am…

Q: Based on the following information: State of Economy Recession Normal Boom Probability of State of…

A: RETURN ON STOCK Profit that is Gain from the Stock investment in a Particular Time Period. Return…

Q: Use the following table of information: Stock X Stock Y Expected Return 14% 18% Standard Deviation…

A: The term "variance" is referred to as the degree of volatility that a stock have with respect to its…

Q: Consider the following information on two stocks: P(State) Stock A Stock B Boom 20% 30% 20% Normal…

A: Part 2: Explanation:Step 1: Calculate the weight of A in the portfolio. - Weight of A = $35,000 /…

Q: Given the information below, compute the expected return and standard deviation for the two stocks:…

A: The expected return of a stock is calculated as the weighted average of probable returns of a stock…

Q: Stock W has the following returns for various states of the economy: State of the Economy…

A: Expected Return and Standard deviation of the Stock is determined using the below formula: Expected…

Q: iven the time series of historical stock returns below, what is the standard deviation? (Hint: the…

A: Variables in the question:Time Period 1 2 3 4 5return (%) 5% -7% 12% 13% -3%

Q: Returns State of Economy Prob J K Recession 0.25 -0.02 0.034 Normal 0.6 0.138 0.062…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Question

Economy Probability Stock A Stock B
Recession
-30%
-20%
10%
5%
40%
15%
Average
Boom
What is the standard deviation of Stock A?
18.8%
24.9%
12.9%
0.25
0.50
0.25
20.0%

In general, portfolio risk is
O Greater; increases
Less; increases
O Greater: decreases
O Less: decreases
than stand-alone risk because diversification
risk.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Analysis

VIEW

Step 2: Calculation of standard deviation

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

6. Stock A and B have expected return and standard deviation respectively as follow Stock Expected return Standard deviation A 11% 13% B 23% 18% Correlation between A and B= 0.45 Risk-free rate = 4% %3D a) Which portfolio should be invested if investor is considering between Risky portfolio 1 (30% in stock A and 70% in stock B) and portfolio 2 (25% in stock A and 75% in stock B) b) If Investor add a risk-free asset C with a return of 5% into the risky portfolio that was choosed in part (a) to form a complete portfolio. What should the optimal proportions of risky portfolio and risk-free asset for an investor whose degree of risk aversion is 3. c) Calculate the expected return and standard deviation of the complete portfolio
SECURITY MARKET LINE You are given the following historical data on market returns, r, and the returns on Stocks A and B, r, and rp: 8A-2 M' A Year 1 29.00% 29.00% 20.00% 2 15.20 15.20 13.10 (10.00) (10.00) 0.50 4 3.30 3.30 7.15 5 23.00 23.00 17.00 31.70 31.70 21.35
What is the expected return for the following stock? State Probability Return Average 50 .25 Recession 35 .05 Depression .15 -35 Select one: Оа.0.12 O b.o.05 Ос.О.10 O d.o.09 Oe.o.11
Review the following market information: Current Stock Market Return 11.25% Current T-Bill Price $979.43 Historic T-Bill Average Return 2.80% Historic Stock Market Average Return 8.10% Stock Beta 1.23 What is the required return (rounded to two places)?
Expected return of a stock with probability of occurrence of 0.4 in the first case with return of 16% and with probability of occurrence of 0.6 in the second case with a return of 12 % is a. 13.6% b. 11 % c. 12 % d. 9.3 %
You have been given this probability distribution for the holding-period return for a stock: Stock of the Economy Probability HPR Boom 0.40 22 % Normal growth 0.35 11 % Recession 0.25 – 9 % What is the expected standard deviation for the stock? Multiple Choice 7.04% None of the options are correct. 2.07% 9.96% 1.44%
Compute for the Standard Deviation:
What is the expected return of the following portfolio? Stock Price Per Share Number of Shares Security Expected Return A $ 16 1509.01 B $ 13 175 10.53
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%
Consider the following data State of Nature Prob. Stock A Return Boom 0.3 16.00% Normal 0.6 14.20% Recession 0.1 8.00% If the current rate on a treasury bill is 4%, what is the risk premium on the stock? (Note: treasury bill rate is generally regarded as risk free rate) Group of answer choices 10.12% 8.14% 14.12% 11.12%
QUESTION 1 Consider the following information on stocks I and II: State of probability of Rate of Return if state Occurs state of Econ. Stock I Stock II 0.20 0.06 0.55 0.47 0.25 0.23 The market risk premium is 8%, and the risk free rate is 6%. Economy Recession Normal Boom a) Which stock has the most Systematic risk? b) Which one has the most unsystematic risk? c) Which stock is "riskier"? Explain. -0.25 0.11 0.68
Stock i’s standard deviation35.00%Market’s standard deviation32.00%Correlation between Stock i and the market0.65Beta coefficient of Stock i:

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS