## IntroYou've estimated the following expected returns for a stock, depending on the strength of the economy:| State (s) | Probability | Expected return ||-------------|-------------|-----------------|| Recession | 0.2 | -0.02 || Normal | 0.5 | 0.09 || Expansion | 0.3 | 0.14 |## Part 1**What is the expected return for the stock?***Input box for entering the expected return, requiring at least 3 decimal places.*[Submit Button]## Part 2**What is the standard deviation of returns for the stock?***Input box for entering the standard deviation, requiring at least 3 decimal places.*[Submit Button]

As per the given information: StateProbabilityExpected…

Intro You've estimated the following expected returns for a stock, depending on the strength of the economy: State (s) Probability Expected return Recession -0.02 Normal Expansion Part 1 What is the expected return for the stock? 3+ decimals Submit 0.2 0.5 0.3 3+ decimals Part 2 What is the standard deviation of returns for the stock? Submit 0.09 0.14

Intro You've estimated the following expected returns for a stock, depending on the strength of the economy: State (s) Probability Expected return Recession -0.02 Normal Expansion Part 1 What is the expected return for the stock? 3+ decimals Submit 0.2 0.5 0.3 3+ decimals Part 2 What is the standard deviation of returns for the stock? Submit 0.09 0.14

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 states of outcomes, probabilities, and expected returns on only stocks three stocks in your portfolio; X, Y, and Z. State Probability X Y Z Boom 0.1 16% 10% 22% Semi-Boom 0.15 14% 8% 18% Normal 0.55 10% 6% 14% Mild-Recession ?? 5% 4% -10% Full-Recession 0.05 -3% 2% -12% a. What is the expected return of the portfolio if $25,000 is invested in X, $35,000 in Y, and $30,000 invested in stock Z? b. What are the standard deviations of stocks X, Y, and Z?
An analyst has estimated how a particular stock’s return will vary depending on what will happen to the economy. What is the standard deviation? STATE OF THEECONOMY PROBABILITY OFSTATE OCCURRING STOCK'S EXPECTEDRATE IF THISSTATE OCCURS Recession Below Average Average Above Average Boom .10 .20 .40 .20 .10 (.60) (.10) .15 .40 .90
Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A Stock B Recession 21 .06 21 Normal 58 109 08 Boom 21 14 25 a. Calculate the expected return for Stocks A and B. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation for Stocks A and B. (Do not round Intermedlate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a. Stock A expected return a. Stock B expected return b. Stock A standard deviation b. Stock B standard deviation 196 96 96 %
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
Consider the following information: Probability of State of Economy .22 .57 .21 Economy Recession Normal Boom Rate of Return if State Occurs. Stock A Stock B a. Expected return of A Expected return of B b. Standard deviation of A Standard deviation of B .020 .100 160 a. Calculate the expected return for the two stocks. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. b. Calculate the standard deviation for the two stocks. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. % % -.27 .17 .40 % %
Your factory has been offered a contract to produce a part for a new printer. The contract would last for 3 years and your cash flows from the contract would be $4.99 million per year. Your upfront setup costs to be ready to produce the part would be $8.06 million. Your discount rate for this contract is 8.1%. a. What does the NPV rule say you should do? b. If you take the contract, what will be the change in the value of your firm? *round to two decimal places*
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% %
Stock W has the following returns for various states of the economy: State of the Economy Probability Stock W's Return Recession 0.15 -10% Below Average 0.20 5% Average 0.30 8% Above Average 0.25 12% Boom 0.10 18% Stock W’s Sharpe ratio assuming the risk-free is 1.25%
4
Quantitative Problem: You are given the following probability distribution for CHC Enterprises: State of Economy Probability Rate of return Strong 0.25 18 % Normal 0.55 8 % Weak 0.20 -6 % Using excel: What is the stock's expected return? Do not round intermediate calculations. Round your answer to two decimal places. % What is the stock's standard deviation? Do not round intermediate calculations. Round your answer to two decimal places. % What is the stock's coefficient of variation? Do not round intermediate calculations. Round your answer to two decimal places.
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% *

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