Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259277214
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 11, Problem 6QP
Summary Introduction
To determine: The expected return on the stock.
Introduction:
Expected return refers to the return that the investors expect on a risky investment in the future.
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Consider the following information:
State of Economy
Probability of State of Economy
Rate of Return if State Occurs
Recession
.21
−.04
Normal
.65
.16
Boom
.14
.22
Calculate the expected return.
Multiple Choice
13.15%
2.27%
12.64%
13.27%
12.01%
Consider the following information:
State ofEconomy
Probability of Stateof Economy
Rate of Returnif State Occurs
Recession
.21
–.13
Normal
.49
.15
Boom
.30
.34
Calculate the expected return.
Considering the following information gathered:
State of Economy
Probability of State of Economy
Rate of Return if State Occurs
Recession
0.11
-0.03
Normal
0.45
0.16
Boom
0.44
0.29
Please Calculate the expected return.
Multiple Choice
18.65%
2.80%
19.63%
20.61%
20.42%
Chapter 11 Solutions
Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 11.1 - How do we calculate the expected return on a...Ch. 11.1 - Prob. 11.1BCQCh. 11.2 - What is a portfolio weight?Ch. 11.2 - How do we calculate the expected return on a...Ch. 11.2 - Is there a simple relationship between the...Ch. 11.3 - Prob. 11.3ACQCh. 11.3 - Prob. 11.3BCQCh. 11.4 - Prob. 11.4ACQCh. 11.4 - Prob. 11.4BCQCh. 11.5 - Prob. 11.5ACQ
Ch. 11.5 - Prob. 11.5BCQCh. 11.5 - Prob. 11.5CCQCh. 11.5 - Prob. 11.5DCQCh. 11.6 - Prob. 11.6ACQCh. 11.6 - Prob. 11.6BCQCh. 11.6 - How do you calculate a portfolio beta?Ch. 11.6 - True or false: The expected return on a risky...Ch. 11.7 - Prob. 11.7ACQCh. 11.7 - Prob. 11.7BCQCh. 11.7 - Prob. 11.7CCQCh. 11.8 - If an investment has a positive NPV, would it plot...Ch. 11.8 - Prob. 11.8BCQCh. 11 - What does variance measure?Ch. 11 - Prob. 11.2CCh. 11 - What is the equation for total return?Ch. 11 - Prob. 11.4CCh. 11 - Prob. 11.5CCh. 11 - By definition, what is the beta of the average...Ch. 11 - Section 11.7What does the security market line...Ch. 11 - Diversifiable and Nondiversifiable Risks. In broad...Ch. 11 - Information and Market Returns. Suppose the...Ch. 11 - Systematic versus Unsystematic Risk. Classify the...Ch. 11 - Systematic versus Unsystematic Risk. Indicate...Ch. 11 - Prob. 5CTCRCh. 11 - Prob. 6CTCRCh. 11 - Prob. 7CTCRCh. 11 - Beta and CAPM. Is it possible that a risky asset...Ch. 11 - Prob. 9CTCRCh. 11 - Earnings and Stock Returns. As indicated by a...Ch. 11 - Determining Portfolio Weights. What are the...Ch. 11 - Portfolio Expected Return. You own a portfolio...Ch. 11 - Prob. 3QPCh. 11 - Prob. 4QPCh. 11 - Prob. 5QPCh. 11 - Prob. 6QPCh. 11 - Calculating Returns and Standard Deviations. Based...Ch. 11 - Prob. 8QPCh. 11 - Prob. 9QPCh. 11 - LO1, LO2 10.Returns and Standard Deviations....Ch. 11 - Calculating Portfolio Betas. You own a stock...Ch. 11 - Calculating Portfolio Betas. You own a portfolio...Ch. 11 - Using CAPM. A stock has a beta of 1.23, the...Ch. 11 - Using CAPM. A stock has an expected return of 11.4...Ch. 11 - Using CAPM. A stock has an expected return of 10.9...Ch. 11 - Prob. 16QPCh. 11 - Using CAPM. A stock has a beta of 1.23 and an...Ch. 11 - Using the SML. Asset W has an expected return of...Ch. 11 - Reward-to-Risk Ratios. Stock Y has a beta of 1.20...Ch. 11 - Prob. 20QPCh. 11 - Prob. 21QPCh. 11 - Prob. 22QPCh. 11 - Prob. 23QPCh. 11 - Calculating Portfolio Weights and Expected Return....Ch. 11 - Portfolio Returns and Deviations. Consider the...Ch. 11 - Prob. 26QPCh. 11 - Analyzing a Portfolio. You want to create a...Ch. 11 - Prob. 28QPCh. 11 - SML. Suppose you observe the following situation:...Ch. 11 - Systematic versus Unsystematic Risk. Consider the...Ch. 11 - Beta is often estimated by linear regression. A...
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Similar questions
- Consider the following information: State ofEconomy Probability ofState of Economy Rate of Returnif State Occurs Recession .37 −.11 Boom .63 .23 Calculate the expected return.arrow_forwardBased on the following information, what is the standard deviation of returns? Probability of State of Economy Rate of Return if State of Economy State Occurs Recession .24 -.092 Normal .45 .107 Boom .31 .217arrow_forwardBased on the following information, what is the standard deviation of returns? State of Economy Probability of State of Economy Rate of Return if State Occurs Recession .22 −.090 Normal .47 .105 Boom .31 .215arrow_forward
- Consider the following information: State of Economy Probability of State of Rate of Return if State Recession Normal Boom Economy .11 .35 .54 Calculate the expected return. Multiple Choice 20.82% 21.86% О 2.53% Occurs -.06 .12 .32arrow_forwardBased on the following information, what is the standard deviation of returns? State of Economy Probability of Stateof Economy Rate of Return ifState Occurs Recession .28 − .096 Normal .41 .111 Boom .31 .221arrow_forwardWhat is the expected return?arrow_forward
- Consider the following information: State of Economy Recession Normal Boom Probability of State of Economy .22 .48 .30 Expected return Rate of Return if State Occurs Calculate the expected return. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decima % -.12 .14 .33arrow_forwardes Consider the following information: State of Economy Recession Boom Probability of State of Economy .36 .64 Expected return Rate of Return if State Occurs Calculate the expected return. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. % -.10 .22arrow_forwardBased on the following information, what is the standard deviation of returns? Rate of Return if State Occurs State of Economy Probability of State of Economy Recession.23 Normal 26 Boom 51 O 19.63 % O 25.45% O 19.09% O 13.82% O 27.76 % -.111 126 236arrow_forward
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