Suppose your expectations regarding the stock price are as follows: State of the Market Boom Normal growth Recession HPR (including Probability Ending Price dividends) 0.26 $ 140 55.0% 110 21.0 80 -16.0 Mean Standard deviation 0.25 0.49 Use the equations E (r) = Ep (s) r(s) and o² = Ep (s) [r(s) - E(r)]² to compute the mean and standard deviation of the HPR on stocks. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. % %

Suppose your expectations regarding the stock price are as follows: State of the Market Boom Normal growth Recession HPR (including Probability Ending Price dividends) 0.26 $ 140 55.0% 110 21.0 80 -16.0 Mean Standard deviation 0.25 0.49 Use the equations E (r) = Ep (s) r(s) and o² = Ep (s) [r(s) - E(r)]² to compute the mean and standard deviation of the HPR on stocks. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. % %

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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Expected Returns: Discrete Distribution The market and Stock J have the following probability distributions: Probability rM rJ 0.3 15% 20% 0.4 9 7 0.3 18 10 Calculate the expected rates of return for the market and Stock J. Round your answers to one decimal place. Expected rate of return (Market): % Expected rate of return (Stock J): % Calculate the standard deviations for the market and Stock J. Do not round intermediate calculations. Round your answers to two decimal places. Standard deviation (Market): % Standard deviation (Stock J): %
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
Given the following excess return index model regression results Ra*= -0.059616 + 0.957478Rm* where; \sigma M = 0.80226720, the return on the market portfolio is 0.085306, and the risk-free rate is 0.018302. Note Ra* and Rm* are excess returns. Calculate the actual return for Stock A. Round to 4 decimals, and present answer as a decimal (.08, not 8%) Answer: 0.0228
A stock's returns have the following distribution: Demand for theCompany's Products Probability of ThisDemand Occurring Rate of Return IfThis Demand Occurs Weak 0.1 (46%) Below average 0.1 (7) Average 0.4 13 Above average 0.1 29 Strong 0.3 57 1.0 Assume the risk-free rate is 3%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places. Stock's expected return: % Standard deviation: % Coefficient of variation: Sharpe ratio:
1. Assume a two-factor model explains stock returns. Regression estimates of stocks A and B on the two factors are given below. Stock B, B, A 1.2 -0.5 4 в 3.5 -0.8 2.0 3 Assume further that factor one has expected return of 10 and standard deviation of 8. Factor two has expected return of 5 and standard deviation of 6. a) Calculate expected returns for A and B. b) Calculate standard deviations for A and B. c) Calculate expected return on a portfolio that invests 60% in A and 40% in B.
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 %
Given the information below, compute the expected return and standard deviation for the two stocks: Economic condition Probability Stock A Return Recession Normal Boom 0.30 0.55 0.15 6% 7% 11% Stock B Return -20% 13% 33%
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Please also explain calculations/steps. A stock's returns have the following distribution: Demand for theCompany's Products Probability of ThisDemand Occurring Rate of Return IfThis Demand Occurs Weak 0.1 (20%) Below average 0.1 (5) Average 0.5 15 Above average 0.2 27 Strong 0.1 50 1.0 Assume the risk-free rate is 2%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places. Stock's expected return: % Standard deviation: % Coefficient of variation: Sharpe ratio:
A stock's returns have the following distribution: Demand for theCompany's Products Probability of thisDemand Occurring Rate of Return ifthis Demand Occurs Weak 0.1 (28%) Below average 0.1 (10) Average 0.4 12 Above average 0.3 22 Strong 0.1 55 1.0 Assume the risk-free rate is 3%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places. Stock's expected return: % Standard deviation: % Coefficient of variation: Sharpe ratio:
Assume the risk-free rate is 2%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places.

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