The stock of Business Adventures sells for $55 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: Boom Dividend $ 2.10 Stock Price Normal economy Recession 1.40 0.50 $ 65 58 49 Required: a. Calculate the expected holding-period return and standard deviation of the holding-period return. All three scenarios are equall ikely. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Expected return %

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
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The stock of Business Adventures sells for $55 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:
Boom
Normal economy
Recession
Dividend
$ 2.10
1.40
0.50
Stock Price
$ 65
58
49
Required:
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.)
Expected return
Standard deviation
%
%
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 3%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Expected return
Standard deviation
%
%
Transcribed Image Text:The stock of Business Adventures sells for $55 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: Boom Normal economy Recession Dividend $ 2.10 1.40 0.50 Stock Price $ 65 58 49 Required: 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.) Expected return Standard deviation % % 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 3%. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Expected return Standard deviation % %
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