Suppose Latasha owns a two-stock portfolio that invests in Happy Dog Soap Company (HDS) and Black Sheep Broadcasting (BSB). Three-quarters of Latasha's portfolio value consists of Happy Dog Soap's shares, and the remaining balance consists of Black Sheep Broadcasting's shares. Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Probability of Expected Returns Market Condition Occurrence HDS BSB Strong 25% 10% 14% Normal 45% 6% 8% Weak 30% -8% -10% Calculate the expected returns for the individual stocks in Latasha's portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year. • The expected rate of return on Happy Dog Soap's stock over the next year is • The expected rate of return on Black Sheep Broadcasting's stock over the next year is • The expected rate of return on Latasha's portfolio over the next year is
Suppose Latasha owns a two-stock portfolio that invests in Happy Dog Soap Company (HDS) and Black Sheep Broadcasting (BSB). Three-quarters of Latasha's portfolio value consists of Happy Dog Soap's shares, and the remaining balance consists of Black Sheep Broadcasting's shares. Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Probability of Expected Returns Market Condition Occurrence HDS BSB Strong 25% 10% 14% Normal 45% 6% 8% Weak 30% -8% -10% Calculate the expected returns for the individual stocks in Latasha's portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year. • The expected rate of return on Happy Dog Soap's stock over the next year is • The expected rate of return on Black Sheep Broadcasting's stock over the next year is • The expected rate of return on Latasha's portfolio over the next year is
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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1.)
|
The expected |
2.)
| The expected rate of return on Black Sheep Broadcasting’s stock over the next year is _______ . |
3.)
| The expected rate of return on Latasha’s portfolio over the next year is _______ . |
Transcribed Image Text:Suppose Latasha owns a two-stock portfolio that invests in Happy Dog Soap Company (HDS) and Black Sheep Broadcasting (BSB). Three-quarters of
Latasha's portfolio value consists of Happy Dog Soap's shares, and the remaining balance consists of Black Sheep Broadcasting's shares.
Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market
conditions are detailed in the following table:
Probability of
Expected Returns
Market Condition
Occurrence
HDS
BSB
Strong
25%
10%
14%
Normal
45%
6%
8%
Weak
30%
-8%
-10%
Calculate the expected returns for the individual stocks in Latasha's portfolio as well as the expected rate of return of the entire portfolio over the
three possible market conditions next year.
• The expected rate of return on Happy Dog Soap's stock over the next year is
• The expected rate of return on Black Sheep Broadcasting's stock over the next year is
• The expected rate of return on Latasha's portfolio over the next year is
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