a-1. What is the expected cash payoff? (Round your answer to the nearest whole dollar amount.) a-2 What is the expected rate of return? (Enter your answer as a percent rounded to the nearest whole number.) b-1. What is the varlance of the expected returns? (In the calculation, use the percentage values, not the declmal values for the rates of return. Do not round intermediate calculations. Round your answer to the nearest whole number.) b-2 What is the standard devlation of the expected returns? (Enter your answer as a percent rounded to 2 decimal places.)

a-1. What is the expected cash payoff? (Round your answer to the nearest whole dollar amount.) a-2 What is the expected rate of return? (Enter your answer as a percent rounded to the nearest whole number.) b-1. What is the varlance of the expected returns? (In the calculation, use the percentage values, not the declmal values for the rates of return. Do not round intermediate calculations. Round your answer to the nearest whole number.) b-2 What is the standard devlation of the expected returns? (Enter your answer as a percent rounded to 2 decimal places.)

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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Question

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A game of chance offers the following odds and payoffs. Each play of the game costs $100. so the net profit per play is the payoff less
$100.
Probability
0.10
Payoff
$700
Net Profit
$680
0.5e
100
0.40
-100
a-1. What is the expected cash payoff? (Round your answer to the nearest whole dollar amount.)
a-2 What is the expected rate of return? (Enter your answer as a percent rounded to the nearest whole number.)
b-1. What Is the varlance of the expected returns? (In the calculation, use the percentage values, not the decimal values for the
rates of return. Do not round intermedlate calculations. Round your answer to the nearest whole number.)
b-2. What is the standard devlation of the expected returns? (Enter your answer as a percent rounded to 2 decimal places.)
a-1. Expected cash payoff
a-2. Expected rate of retum
%
b-1.
Variance
b-2.
Standard deviation

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A game of chance offers the following odds and payoffs. Each play of the game costs $200, so the net profit per play is the payoff less $200. Probability Payoff Net Profit 0.10 $700 $500 0.50 300 100 0.40 0 –200 a-1. What is the expected cash payoff? (Round your answer to the nearest whole dollar amount.) a-2. What is the expected rate of return? (Enter your answer as a percent rounded to the nearest whole number.) b-1. What is the variance of the expected returns? (In the calculation, use the percentage values, not the decimal values for the rates of return. Do not round intermediate calculations. Round your answer to the nearest whole number.) b-2. What is the standard deviation of the expected returns? (Enter your answer as a percent rounded to 2 decimal places.)
A game of chance offers the following odds and payoffs. Each play of the game costs $200, so the net profit per play is the payoff less $200. Probability 0.30 0.60 0.10 Payoff $400 300 0 Net Profit $200 100 -200 a-1. What is the expected cash payoff? Note: Round your answer to the nearest whole dollar amount. a-2. What is the expected rate of return? Note: Enter your answer as a percent rounded to the nearest whole number. b-1. What is the variance of the expected returns? Note: In the calculation, use the percentage values, not the decimal values for the rates of return. Do not round intermediate calculations. Round your answer to the nearest whole number. b-2. What is the standard deviation of the expected returns? Note: Enter your answer as a percent rounded to 2 decimal places. a-1. Expected cash payoff a-2. Expected rate of return b-1. Variance b-2. Standard deviation $ 300 50 % %
A game of chance offers the following odds and payoffs. Each play of the game costs $200, so the net profit per play is the payoff less $200. Probability Payoff Net Profit 0.30 $400 $200 0.60 300 100 0.10 0 –200 1. What is the expected cash payoff? Note: Round your answer to the nearest whole dollar amount. 2. What is the expected rate of return? Note: Enter your answer as a percent rounded to the nearest whole number. 1.What is the variance of the expected returns? Note: In the calculation, use the percentage values, not the decimal values for the rates of return. Do not round intermediate calculations. Round your answer to the nearest whole number. 2.hat is the standard deviation of the expected returns? Note: Enter your answer as a percent rounded to 2 decimal places.
If the risk-free rate is 4.8 percent and the risk premium is 6.8 percent, what is the required return? (Round your answer to 1 decimal place.) Required Return: ___.__%
1) Using the Black and Scholes formula, for each payoff compute the price, delta and probability of being exercised: 1a) A call, K=90, So=100, T=0.25, o=0.2 and r=0.01. 1b) A put, K=37, So=35, T=0.3, o=0.3 and r=0.02. 1c) A call, K=23, So=24, T=5 months, o=24% and r=2%. 1d) A call, K=95% of So, So=50, T=9 months, o=50% and r=3%. 1e) A put, K=97% of So, So=95, T=1 year, o=D30% and r=2%. 1f) An "at-the-money" straddle, So=95, T = 3 months, o=35% and r=2%.
Let's say you make a bet on a coin toss, heads 5.938, tails 6.942. Disregarding the discount factor (you don't need to take the present value), what is the value (expected return) of this bet?
Suppose you won the lottery and had two options: (1) receiving$0.5 million or (2) taking a gamble in which, at the flip of a coin, you receive $1 million if ahead comes up but receive zero if a tail comes up.a. What is the expected value of the gamble?b. Would you take the sure $0.5 million or the gamble?c. If you chose the sure $0.5 million, would that indicate that you are a risk averter or arisk seeker?d. Suppose the payoff was actually $0.5 million—that was the only choice. You nowface the choice of investing it in a U.S. Treasury bond that will return $537,500 at theend of a year or a common stock that has a 50–50 chance of being worthless or worth$1,150,000 at the end of the year. 1. The expected profit on the T-bond investment is $37,500. What is the expected dollarprofit on the stock investment?2. The expected rate of return on the T-bond investment is 7.5%. What is the expectedrate of return on the stock investment?3. Would you invest in the bond or the stock? Why?4. Exactly…
Suppose the nominal rate of return is 0.085 and the risk-free rate is 0.010. What is the risk premium? Instruction: Round to two decimal places. E.g., if your answer is 0.0106465 or 1.06465%, you should type ONLY the number .01, neither 0.0106465, 0.0106, nor 1.065. Otherwise, Blackboard will treat it as a wrong answer.
You have determined that your risk tolerance is 100. Calculate your utility for the following payoffs: (Round your answers to 2 decimal places.) Payoff Utility 13 20 33
a) Plot the payoff and profit of the following options based strategy: Buy 3 puts with strike 100, sell 4 puts with strike 110 and buy 1 put with strike 140. Explain all your calculations. b) If the price of the put with strike 100 is $8 and the price of the put with strike 140 is $16, what can you say about the price of the put with strike 110? Explain
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Future values. Fill in the future values for the following table, using one of the three methods below a. Use the future value formula, FV= PV×(1+n b. Use the TVM keys from a calculator c. Use the TVM function in a spreadsheet, Present Value Interest Rate Number of Periods Future Value 222.00 3% $539 Round to the nearest cent)

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