None SavedHelpSuppose your expectations regarding the stock market are as follows:State of the EconomyBoomNormal growthRecession.ProbabilityHPR0.240%0.3200.5-173E(r) = P(s)r(s)Var (r) = 0² =Σp(s)[r(s) - E(r)]²SD (r) ==√Var (r)Required:Use above equations to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations.Round your answers to 2 decimal places.)MeanStandard deviation5.50%2.24 %F280F3a< Prev1 of 4Next >F5MacBook AirF6&87^< 6%ale5$#4#362QWERASDFL&F7* ∞(89TYUGH=F98:4)OF100PJKL<ZXCVBNMV->.THдвT

The formula for mean, variance and standard deviation are already given in the question. These…

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Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 7P

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Consider an event study of the following stock. Realised return Market return t = 0 (event day) 0.1 0.1 t =1 0.06 0.04 t = 2 0.03 0.02 t = 3 0.015 0.01 Suppose that the estimated market model is . What is the CAR (cumulative abnormal returns) for t = 3?
suppose your expectations regarding the stock market are as follows: State of the Economy Probability HPR Boom 0.2 42% Normal growth 0.6 23 Recession 0.2-17 E(r) = Σss = 1p(s)r( s) Var(r)=\sigma 2 = Σss = 1p(s)[r(s)-E(r)]2 SD (r)=\sigma = Var(r) ✓ Required: Use above equations to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
What is the GBM and how should this be understood
Suppose your expectations regarding the stock price are as follows: State of the Market Probability Ending Price HPR (includingdividends) Boom 0.30 $ 140 53.5 % Normal growth 0.28 110 17.5 Recession 0.42 80 −12.0 Use the equations E(r)=Σsp(s)r(s)E(r)=Σsp(s)r(s) and σ2=Σsp(s) [r(s)−E(r)]2σ2=Σsp(s) [r(s)−E(r)]2 to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Consider the following information: \table[[State of,Probability of,\table[[Rate of Return],[if State Occurs]]],[,],[\table[[State of],[Economy]],Stock A,Stock B],[Recession,0.20,0.05,-0.20],[Normal,0.40,0.10,0.10],[Boom,0.40,0.13,0.25]] a. Calculate the expected return for the two stocks. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) \table[[,,],[Expected return for A,,%
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Suppose that we have this information about the current market return and the risk-free return: • The market return is 12%, the risk free return is 8%, and the ẞ is 1.4. Calculate the cost of equity.
Assuming your utility function U = E(r) - Ao². Consider the investments shown in the table. If your risk aversion coefficient is -2, which investment would you choose? Investment E[r] #1 #2 #3 #4 #2 #3 #4 #1 12% 15% 15% 24% σ 40% 40% 30% 40%
Suppose your expectations regarding the stock market are as follows: State of the Economy Boom Normal growth Recession E(r) p(s)r(s) = Probability HPR 0.4 43% 0.5 23 0.1 -16 Var (r) = P(s)[r(s) - E(r)]² = SD (r) ==√√Var (r) Required: Use above equations to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Mean Standard deviation % %
Suppose your expectations regarding the stock market are as follows: State of the Economy Boom Normal growth Recession Probability 0.3 0.6 0.1 Mean Standard deviation HPR 24.90 % % 41% 24 E (r) E-1P(s)r (s) Var (r) = o² = s-1p(s)[r (s) - E(r)]² SD (r) = o = √Var (r) Required: Use above equations to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculation Round your answers to 2 decimal places.) -18 K
As per Capital Asset Pricing Model (CAPM) : Re=Rf+(Rm-Rf)βwhere, Re= Required rate of returnRf= Risk free rate of return = 0%Rm = Market return or Expected return on market = 3.3%β = Beta of the stock = 1.24Now, Re= Rf + Rm - Rf βRe= 0 + 3.3 - 0 ×1.24Re= 4.092% To calculate the abnormal return we will use the formula: = E(R) - Re= 3% - 4.092% = -1.092% or - 0.01092 How did you get the 4.092%?
The return earned for Asman stock is between time 1 and time 2 is ??? The between time 2 and time 3 is ??? The between time 3 and time 4 is ??? Your investment in Salinas stock yielded an annual rate of return between time 1 and time 2 ??? The between of time 2 and time 3 is ??? The between time 3 and time 4 is ???

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