You have been given the following information: State of Economy Recession Normal Boom Probability of State of Economy 17 .58 .25 Rate of Return if State Occurs a. Stock A expected return a. Stock B expected return b. Stock A standard deviation b. Stock B standard deviation Stock A .08 .11 16 Stock B -12 a. Calculate the expected return for the two stocks. (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 the two stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to decimal places, e.g., 32.16.) % % % % .17 .34

You have been given the following information: State of Economy Recession Normal Boom Probability of State of Economy 17 .58 .25 Rate of Return if State Occurs a. Stock A expected return a. Stock B expected return b. Stock A standard deviation b. Stock B standard deviation Stock A .08 .11 16 Stock B -12 a. Calculate the expected return for the two stocks. (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 the two stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to decimal places, e.g., 32.16.) % % % % .17 .34

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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Consider the following information: State of Economy Boom Bust Probability of State of Economy .75 .25 a. Expected return b. Variance of a portfolio Rate of Return if State Occurs. Stock C .27 -.21 Stock A .07 .12 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C? Note: Do not round intermediate calculations and round your answer to 6 decimal places, e.g...161616. Stock B .18 -.08 %
Use the following information on states of the economy and stock returns to calculate the expected return and the standard deviation of returns. Assume that all three states are equally likely. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) State of Economy Security Return If State Occurs Recession -8 % Normal 13 Boom 23
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 %
Consider the following information: Probability of State of Economy .22 .57 .21 Economy Recession Normal Boom 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 .020 .100 160 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. 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. % % -.27 .17 .40 % %
Consider the following information: State of Economy Recession. Normal Boom Probability of State of Economy .17 .58 .25 Rate of Return if State Occurs Stock A Stock B .08 -.12 11 .17 .34 a. Stock A expected return a. Stock B expected return b. Stock A standard deviation b. Stock B standard deviation 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 intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) .16 Answer is complete but not entirely correct. 9.86 % 21.46 % 7.70 % 9.50 %
An investor is considering the purchase of Gryphon stock, which has returns given in the table below. Scenario Recession Normal Boom Enter your answers below. E(r) = Number Probability Std. Dev. = Number 0.23 0.41 10.36 Calculate the expected return and standard deviation of Gryphon. Round your answers to 2 decimal places. % Rate of Return 2% 6% 8% %
Following are three economic states, their likelihoods, and the potential returns: Economic State Fast growth Slow growth Recession Probability 0.27 0.35 0.38 Standard deviation Return 32% 4 -22 Determine the standard deviation of the expected return. (Do not round intermediate calculations and round your answe decimal places.) %
Suppose you observe the following situation: State of Economy Bust Normal Boom Probability of State .20 .60 .20 Return if State Occurs Stock B -.04 .15 .30 a. Stock A a. Stock B b. Expected market risk premium Stock A -.06 .15 .50 a. Calculate the expected return on each stock. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Assuming the capital asset pricing model holds and Stock A's beta is greater than Stock B's beta by .47, what is the expected market risk premium? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % % %
You are given the following information concerning a stock and the market: Returns Year Market Stock 2014 10 % 25 % 2015 12 28 2016 13 4 2017 −14 −22 2018 37 16 2019 15 23 a. Calculate the average return and standard deviation for the market and the stock. (Use Excel to complete the problem. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) b. Calculate the correlation between the stock and the market, as well as the stock’s beta. (Use Excel to complete the problem. Do not round intermediate calculations. Round your correlation answer to 2 decimal places and beta answer to 4 decimal places.)
Consider the following information: State of Probability of Economy State of Economy Boom Bust .58 .42 Rate of Return if State Occurs Variance Stock A .07 .16 Stock B 15 .06 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return 12.87% % Stock C 33 -.06 b. What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., 32.161616.) 1.29% *
Consider the following information about Stocks I and II: State of Economy Recession Normal Irrational exuberance Probability of State of Economy .20 .60 .20 Rate of Return if State Occurs Stock I .04 .26 .10 Stock II -.35 15 .55 The market risk premium is 5 percent, and the risk-free rate is 4 percent. (Do not round intermediate calculations. Enter your standard deviation answers as a percent rounded to 2 decimal places, e.g., 32.16. Round your beta answers to 2 decimal places, e.g., 32.16.)

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