Given the following information below for Stock A, calculate its standard deviation6.Where:wwwwwpi Probability of some state įa (R-R)'xpmeanilRi = Expected return in state įRmsa Expected returnEconomic State i pi Probability ofsome stateiRi=Expected return instateiWeighted Ri foreach State.3922%ВoomNormal11%60Bust213%Rmean(Sum Column for Stock A Expected ReturnlBring the answer you calculated for Rmean Expected return above and enter it in the correct columnbelow the finish calculating the Standard Deviation.(Ri-Rmean* x piState i(Ri-Rmean) (Ri - Bmean)pi=Ri =Rmean=22%39BoomNormal6011%Bust3%21Sum of Column = Variance) =Square Root of Variance Standard Deviation

Expected return can be defined as the return which an investor expects to be generate on a project…

Answered: Given the following information below…

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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Stock A has a correlation with the market of 0.53. Assuming that the standard deviation of returns for Stock A is 24.0% and that the standard deviation of returns for the market is 10.0%, what is beta for stock A? A 1.31 B. 1.27 C. 0.17 D. 0.22
K -61 =1 2 N (Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Probability 0.25 0.50 0.25 Common Stock A Probability 0.25 0.25 0.25 0.25 (Click on the icon in order to copy its contents into a spreadsheet.) @ 2 a. Given the information in the table, the expected rate of return for stock A is 16.25 %. (Round to two decimal places.) The standard deviation of stock A is %. (Round to two decimal places.) b. The expected rate of return for stock B is%. (Round to two decimal places.) The standard deviation for stock B is%. (Round to two decimal places.) c. Based on the risk (as measured by the standard deviation) and return of each stock, which investment is better? (Select the best choice below.) 30² F2 W OA. Stock A is better because it has a higher expected rate of return with less risk B. Stock B is…
A stock's returns have the following distribution: Probability Rate of Return 0.1 -2% 0.2 -10% 0.4 10 % 0.2 20 % 0.1 30% Calculate the stock's a) expected return, b) standard deviation, and c) coefficient of variation.
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA - 2.60 + 0.90RM + CA Rg- -2.00 + 1.20RM + eg OM- 26, R-equarea 0.21; R-squaren 0.12 Assume you create portfolio Pwith investment proportions of 0.70 in A and 0.30 in B. a. What is the standard deviation of the portfollo? (Do not round your intermediate calculations. Round your answer to 2 decimal places.) Standard deviation b. What is the beta of your portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places.) Portfolio beta c. What is the firm-specific variance of your portfolio? (Do not round your intermediate calculations. Round your answer to 4 decimal places.) Firm-specific
An investor has the following expectations on the performance of Stock X and Stock Y: Probability Scenario Returns (%) Stock X Stock Y 0.20 Good 50% 14% 0.50 Average 30% 6% 0.30 Bad -10% 6% Estimate the portfolio return with an allocation of 70:30 (X:Y) in the two stocks. Select one: O a. 11.92% ОБ. 14.80% O. 32.00% O d. 17.68% Following Question 18, estimate the correlation coefficient between the two stocks. Select one: O a. 0.63 оъ. 0.46 O c. 0.84 O d. 0.76 Following Question 18 and 19, estimate the portfolio standard deviation with an allocation of 40:60 in these two stocks. Select one: O a. 9.6% о ь. 10.8% O c. 10.2% O d. 9.2%
Consider the following information: Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Recession .20 .010 −.35 Normal .55 .090 .25 Boom .25 .240 .48 Calculate the expected return for the two stocks. Calculate the standard deviation for the two stocks.
What are the expected return and the standard deviation for the CoR Stock? CoR Stock I Probability Rate of Scenario of Scenario Return Worst Case 0.10 -20% Poor Case 0.20 -5% Most Likely 0.40 1% Good Case 0.20 5% Best Case 0.10 30%
Consider the following information for Stocks A, B, and C. The returns on the three stocks, while positively correlated, are not perfectly correlated. The risk-free rate is 5.50%. Stock A B C Expected Return 10.00% 10.90% 11.80% Standard Deviation 15% 15% 15% Beta 1.5 1.8 2.1 Let , be the expected return of stock i, ra represent the risk-free rate, b represent the Beta of a stock, and TM represent the market return. Using SML equation, you can solve for the market risk premium which, in this case, equals approximately The beta for Fund P is approximately Consider Fund P, which has one third of its funds invested in each of stock A, B, and C. You have the market risk premium, the beta for Fund P, and the risk-free rate. Hint: Recall that because the market is in equilibrium, the required rate of return is equal to the expected rate of return for each stock. This information implies that the required rate of return for Fund P is approximately Which of the following is the reason why the…
Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (20%) (46%) 0.2 7 0 0.4 15 15 0.2 23 30 0.1 47 50 Calculate the standard deviation of returns for Stock A.
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Consider the following information: Probability of State of State of Economy Book Bust Economy 0.55 Variance Rate of Return if State Occurs Stock A Stock B 0.06 0.14 0.10 0.02 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediat Round the final answer to 2 decimal places.) Expected return b. What is the variance of a portfolio invested 25% each in A and B and 50% in C? (Do not round intermediate calc the final answer to 6 decimal places.) 10.65% Stock C 0.34 -0.07

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