You have been given this probability distribution for the holding-period return for a stock: Stock of the Economy Probability HPR Boom 0.40 22 % Normal growth 0.35 11 % Recession 0.25 – 9 % What is the expected standard deviation for the stock? Multiple Choice 7.04% None of the options are correct. 2.07% 9.96% 1.44%

You have been given this probability distribution for the holding-period return for a stock: Stock of the Economy Probability HPR Boom 0.40 22 % Normal growth 0.35 11 % Recession 0.25 – 9 % What is the expected standard deviation for the stock? Multiple Choice 7.04% None of the options are correct. 2.07% 9.96% 1.44%

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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1. The distribution of rates of return on XYZ stock is as follows Probability of State Occurring State of XYZ Stock Economy Return (%) Depression 0. 10 -4.5% Recession 0.20 4.4% Normal 0.50 12.0% Вoom 0.20 20.7% а. What is the expected return for the stock? b. What is the standard deviation of returns for the stock?
What is the required return for each stock? What is required return for stock B? Scenario Probability Stock A Stock B Market Risk-free rate Bust 0.25 -0.15 -0.05 Normal 0.55 0.2 0.1 Boom 0.2 0.4 0.3 Beta 1.2 0.9 Expected return 0.13 0.05
You have been given this probability distribution for the holding-period return for KMP stock: Stock of the Economy Probability HPR Boom 0.30 18 % Normal growth 0.50 12 % Recession 0.20 – 5 % What is the expected standard deviation for KMP stock? A) 6.91% B) 8.13% C) 7.79% D) 7.25% E) 8.85%Please provide justification
You have been given this probability distribution for the holding-period return for a stock: Stock of the Economy Probability HPR Boom 0.40 0.35 0.25 22 % Normal growth 11 % Recession – 9 % What is the expected variance for the stock? A) 142.07% B) 189.96% C) 177.04% D) 128.17% E) None of the options are correct. Please provide justification
Consider the following information on Stocks I and II: Probability of State of Rate of Return if State Occurs State of Economy Economy Stock I Stock II Recession Normal 0.30 8.03 -0.30 Irrational exuberance 0.30 0.40 8.37 0.31 8.14 0.47 The market risk premium is 8 percent and the risk-free rate is 40.5 percent. a-1. What is the beta of each stock? Note: Do not round Intermediate calculations. Round your answers to 2 decimal places. Stock I Stock I Beta a-2. Which stock has the most systematic risk? ○ Stock I ○ Stock Il b-1. What is the standard deviation of each stock? Note: Do not round Intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Standard Deviation Stock I Stock I % b-2. Which one has the most unsystematic risk? ○ Stock I ○ Stock Il c. Which stock is "riskier"? ○ Stock I ○ Stock Il
Suppose your expectations regarding the stock price are as follows: State of the Market Probability Ending Price HPR (including dividends) Boom 0.35 $140 44.5% Normal growth 0.30 110 14.0 Recession 0.35 80 -16.5 Use the following equations to compute the mean and standard deviation of the HPR on stocks:
Suppose your expectations regarding the stock price are as follows: State of the Market Boom Normal growth Recession HPR (including Probability Ending Price dividends 0.20 $ 140 47.5% 0.29 110 13.0 0.51 80 -20.0 Use the equations E (r) = Ep (s) r(s) and o² = Σp (s) [r(s) – E(r)]² to compute the mean and standard deviation of the HPR on stocks. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Mean Standard deviation % %
You have been given this probability distribution for the holding-period return for KMP stock: Stock of the Economy Вoom Probability 0.30 0.50 HPR 18% Normal growth Recession 12% 0.20 - 5% What is the expected holding-period return for KMP stock? What is the expected standard deviation for KMP stock? 10.40%; 8.13% 9.32%; 6.91% 11.63%; 7.25% None of the options are correct
Based on the table below, what is the expected return of the stock? Probability 0.20 0.10 0.40 0.20 0.10 O 12.8% O 12.6% O 12.4% O 13.0% Return 8% 10% 12% 15% 20% 1
You've estimated the following expected returns for a stock, depending on the strength of the economy: State (s) Probability Expected return Recession 0.1 -0.05 Normal 0.5 0.06 Expansion 0.4 0.11 What is the expected return for the stock? What is the standard deviation of returns for the stock?
You have estimated the following probability distributions of expected future returns for Stocks X and Y: Stock X Stock Y Probability Return Probability Return 0.1 -12 % 0.2 4 % 0.1 11 0.2 7 0.3 14 0.3 11 0.3 30 0.2 17 0.2 40 0.1 30 What is the expected rate of return for Stock X? Stock Y? Round your answers to one decimal place.Stock X: % Stock Y: % What is the standard deviation of expected returns for Stock X? For Stock Y? Round your answers to two decimal places.Stock X: % Stock Y: % Which stock would you consider to be riskier? is riskier because it has a standard deviation of returns.
Suppose your expectations regarding the stock price are as follows: HPR (including dividends) State of the Market Boom Normal growth Recession Probability Ending Price 0.35 0.30 0.35 Mean Standard deviation Use the equations E (r) = Ep (s) r(s) and o² = Ep (s) [r(s) – E(r)]² to compute the mean and standard deviation of the HPR S S on stocks. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. do do $ 140 110 80 % 44.5% 14.0 -16.5 %

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