CORPORATE FINANCE
CORPORATE FINANCE
12th Edition
ISBN: 9781307702804
Author: Ross
Publisher: MCG/CREATE
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Chapter 11, Problem 5QAP
Summary Introduction

Adequate information:

Probability in Recession PR = 0.25

Probability in Normal PN = 0.55

Probability in Boom PB = 0.20

Return for Stock A in Recession RR = 0.06

Return for Stock A in Normal RN = 0.07

Return for Stock A in Boom RB = 0.11

Return for Stock B in Recession RR = -0.20

Return for Stock B in Normal RN = 0.13

Return for Stock B in Boom RB = 0.33

To compute: Expected return and standard deviation of Stocks A and B.

Introduction: Expected return refers to the return that is anticipated on the stock in the near future. The standard deviation of stock refers to the dispersion of the actual price from the average price.

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Chapter 11 Solutions

CORPORATE FINANCE

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