Suppose you invest 40% of your fund in stock A and the other 60% in stock B. If stock A and B are expected to have the following returns next year, then what are the expected returns for Stock A, Stock B and your portfolio? ProbabilityStock A Stock B State of Economy Recession Boom .3 .7 13.9%; 4.8%; 10.26% 10.2%; 4.8%; 10.26% 13.9%; 4.8%; 8.44% 10.2%; 4.4%; 8.44% -12% 2% 25% 6%

Suppose you invest 40% of your fund in stock A and the other 60% in stock B. If stock A and B are expected to have the following returns next year, then what are the expected returns for Stock A, Stock B and your portfolio? ProbabilityStock A Stock B State of Economy Recession Boom .3 .7 13.9%; 4.8%; 10.26% 10.2%; 4.8%; 10.26% 13.9%; 4.8%; 8.44% 10.2%; 4.4%; 8.44% -12% 2% 25% 6%

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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5 Consider the following information: Probability of State of State of Economy Boom Good Poor Bust Economy 15 .45 .35 .05 a. Rate of Return if State Occurs a. Expected return b-1. Variance b-2. Standard deviation Stock A Stock B Stock C .36 46 .26 .21 .17 10 -.03 -.17 Your portfolio is invested 22 percent each in A and C, and 56 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-1. What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.) b-2. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % -.06 -.21 % -.04 -.07
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You own a portfolio with the following expected returns given the various states of the economy. What is the overall portfolio expected return? State of Economy Boom Normal Recession 0.0701 O 0.0648 0,0719 O 0.0548 Expected returns in various states of the economy Probability 0.0442 23.00% 70.00% 7.00% 13.00% 7.00% -10.00% Rate of Return
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
Jill believes that economic conditions during the next year will be strong, normal, or weak, and she thinks that the firm's returns will have the probability distribution shown below. What's the standard deviation of the estimated returns? Economic Conditions Strong Normal Weak 19.55% 18.98% 19.37% 18.62% Probability 30% 40% 30% Return 34.0% 10.0% -15.0%
Nikul
Consider the following information: Economy Recession Normal Boom Probability of State of Economy .21 .56 .23 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 .015 .095 .250 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. -.36 .26 .49 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. % % %
State of economy Probability Rate of returns Stock A Stock B Stock C Boom 0.35 0.24 0.36 0.55 Normal 0.50 0.17 0.13 0.09 Bust 0.15 0 0.28 0.45 Base on the table above, you invested 40% on Stock A and B and 20% on Stock C. Calculate the expected return on this portfolio.
Consider the case of two financial assets and three market conditions (states). The tablebelow gives the respective probability for each market condition and the return of each assetin each one of them. Market Conditions State Recession Normal Expansion Probability of state 30% 40% 30% Return of asset A -30% 20% 55% Return of asset B -10% 70% 0% Consider the portfolio with 50% investment in each of the two assets above. Calculatethe expected return and the standard deviation of the portfolio.
Stock A has the following returns for various states of the economy: State of the Economy Probability Stock A's Return Recession 10% -.30 Below Average 20% -.02 Average 40% .10 Above Average 20% .18 Boom 10% .40 Stock A's expected return is A. 7.2% B. 9.6% C. 5.4% D. 8.2%
Suppose your expectations regarding the stock market are as follows: State of the Economy Boom Normal growth Recession E (r) = Σs=1 P(s)r(s) Var (r) = ² = Probability 0.3 0.4 0.3 Σs ₁ p (s)[r (s)- E (r)]² HPR 44% 14 -16 SD (r) = 0 = 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 are the expected returns for stock A and stock B? State Probability Return on A Return on B Boom .60 0.35 0.10 Bust .40 0.05 0.25 a. 15.50%, 10.83% b. 26.00%, 14.50% c. 23.00%, 16.00% d. 21.50%, 16.75%

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