4. Given the following information, Calculate the (a) expected return and (b) risk (standarddeviation) for Stock A and B.Stock AProbabilities0.20 0.15 0.15 0.50Possible Outcomes 15% 28% -12% -5%Stock B0.30 0.10 0.30 0.3050%ProbabilitiesPossible Outcomes 20%-16% -10%Which stock should be chosen?

Stock A's returns: 15% with 20% probability 28% with 15% probability -12% with 15% probability -5%…

Answered: Given 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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Similar questions

Give typing answer with explanation and conclusion Assume that two stocks are available. The first stock (Stock A) has an expected return of 25% and a standard deviation of 20%; the second stock (Stock B) has an expected return of 12% and a standard deviation of 10%. If the correlation between the stocks is 0.10, what are the weight of Stock A (WA) and Weight of Stock B(WB) in the minimum-variance portfolio? WA=17.39%, WB=82.61% WA=14.29%, WB=85.71% WA=10.30%, WB=89.70% WA=30.25%, WB=69.75%
In excel form
K (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? Common Stock A Probability 0.20 0.60 0.20 Common Stock B Return 13% 17% 18% Probability 0.10 0.40 0.40 0.10 (Click on the icon in order to copy its contents into a spreadsheet.) Return -7% 5% 16% 21% www a. Given the information in the table, the expected rate of return for stock A is 16.40 %. (Round to two decimal places.) The standard deviation of stock A is 1.74 %. (Round to two decimal places.) b. The expected rate of return for stock B is 9.8 %. (Round to two decimal places.) The standard deviation for stock B is 6.12 %. (Round to two decimal places.)
Stock A has a beta of 1.5 and Stock B has a beta of 0.8. Which of the following statements is most accurate? Question 15 options: Stock A has a lower expected return than Stock B. Stock A has more systematic risk than Stock B. Stock A has less diversifiable risk than Stock B. Stock A has more total risk than Stock B.
Consider the following probability distribution for stocks A and B: Table 4 Probability Distribution for Stocks A and B State Probability Return on Stock A Return on Stock B 1 0.1 10% 8% 2 0.2 13% 7% 3 0.2 12% 6% 4 0.3 14% 9% 5 0.2 15% 8% The variances of Stocks A and B are _____ and _____, respectively. Group of answer choices .015%; .019% .022%; .012% .032%; .02% .015%; .011% .014%; .021%
Which of the following statement(s) is(are) true? 1) The real rate of interest is determined by the supply and demand for funds. II) The real rate of interest is determined by the expected rate of inflation. III) The real rate of interest is unaffected by actions of the Fed. IV) The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation. III and IV only. I only. OII and III only. O, II, III, and IV only. OI and III only.
A stock portfolio has the following returns under the market conditions listed below. Market Condition Probability Return Bull 0.4 $ 200 Stable 0.3 $100 Bear 0.3 - $100 Referring to Scenario 20-4, what is the EMV?
Your client is considering purchasing stocks. The actual return of one o his choices follows here. Assist him by calculating the standard deviation and advise him what the risk is. Stock 'A' Actual Returns = 6%, 12%, 8%, 10% 0.0164 0.0258 0.0542 0.1072
Give typing answer with explanation and conclusion the expected return on stock A is 11.35%. the expected return on stock B is 8.7%. assuming CAPM holds, if the beta of stock A is higher than the beta of stock B by 0.17, what should the risk premium be?
b. Consider the following information about three stocks: Probability of State of i. ii. iii. iv. State of Economy V. Boom Recession Economy 0.40 0.60 From the information given, you are required to answer the following questions. Compute the Standard Deviation for each stock. Compute the Coefficient Variation for each stock. Based on your computation in part (i) and (ii), which stock is riskier? Explain your answer. Rate of Return if State Occurs Stock Hang Stock Hang Jebat 7% 13% Tuah 28% (5%) Stock Hang Kasturi 15% 3% Assume that you have RM14,000 invested in Stock Hang Jebat whose beta is 1.5, RM19,000 invested in Stock Hang Kasturi whose beta is 2.5 and RM17,000 invested in Stock Hang Tuah whose beta is 1.6. Determine what is the beta of this portfolio. Based on your answer in part (iv), compute the required rate of return for this portfolio, given that the market rate of return is 13% and risk-free rate is 5%.
Consider the following stocks and pick the best answer. Standard Stock Beta Deviation A 25% 1.25 35% 1.15 28% 1.85 Stock C is likely to provide the lowest expected return Stock B is likely to provide the highest expected return Stock A is likely to provide the highest expected return Stock A is likely to provide the lowest expected return O Stock B is likely to provide the lowest expected return
Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10% 8% 2 0.20 13% 7% 3 0.20 12% 6% 4 0.30 14% 9% 5 0.20 15% 8% The coefficient of correlation between A and B is:

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