The stock of Business Adventures sells for $40 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows: Dividend Stock Price Boom dividend $2.80 stock price $48 Normal economy dividend 1.80 stock price $43 Recession dividend 0.90 stock price $34 a. Calculate the expected holding-period return and standard deviation of the holding-period return. All three scenarios are equally likely. (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury bills. The return on bills is 5%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

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Ee 183.

The stock of Business Adventures sells for $40 a share. Its likely dividend payout and end-of-year price depend on the state of the
economy by the end of the year as follows: Dividend Stock Price Boom dividend $2.80 stock price $48 Normal economy dividend 1.80
stock price $43 Recession dividend 0.90 stock price $34
a. Calculate the expected holding-period return and standard deviation of the holding-period return. All three scenarios are equally likely.
(Do not round intermediate calculations. Round your answers to 2 decimal places.)
b. Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury bills. The
return on bills is 5%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Transcribed Image Text:The stock of Business Adventures sells for $40 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows: Dividend Stock Price Boom dividend $2.80 stock price $48 Normal economy dividend 1.80 stock price $43 Recession dividend 0.90 stock price $34 a. Calculate the expected holding-period return and standard deviation of the holding-period return. All three scenarios are equally likely. (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury bills. The return on bills is 5%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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