LO1 7.Calculating Returns and Standard Deviations Based on the followinginformation, calculate the expected returns and standard deviations for the twostocks.Page 388State of EconomyRecessionNormalBoomProbability of State Rate of Return if State Occursof EconomyStock AStock B.15-.17.55.12.30.27.04.09.17

Expected rate of return is the profit or loss on the investor that is assumed to be anticipated by…

Calculating Returns and Standard Deviations Based on the following information, calculate the expected returns and standard deviations for the two stocks. Page 388 Probability of State Rate of Return if State Occurs Stock A Stock B .04 -.17 .09 .12 .17 .27 State of Economy of Economy Recession Normal Boom .15 .55 .30

Calculating Returns and Standard Deviations Based on the following information, calculate the expected returns and standard deviations for the two stocks. Page 388 Probability of State Rate of Return if State Occurs Stock A Stock B .04 -.17 .09 .12 .17 .27 State of Economy of Economy Recession Normal Boom .15 .55 .30

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

See similar textbooks

Similar questions

Refer to the following payoff table (values are profit): State of Nature Alternative S1 S2 A1 75 −40 A2 0 100 Prior Probability 0.6 0.4 What is the expected payoff of the decision strategy (i.e. using the EMV/EP criterion)?
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%
The returns on AA Berhad and BB Berhad are given below, State of Economy Probability of Return (%) AA Return (%) BB occurring Berhad Berhad 1 0.30 6 -15 0.50 10 18 3 0.20 17 40 Calculate: a) Expected return E(R) for i) АА Beфad ii) ВВ Behad b) Standard deviation for i) AA Berhad ii) ВВ ВBehad c) Discuss any FOUR (4) benefits of diversification by referring to AA and BB Berhad.
Consider the following information about the various states of economy and the returns ofvarious investment alternatives for each scenario. Answer the questions that follow.% Return on T-Bills, Stocks and MarketIndexState of the Economy Probability TBills Phillips PayupRubbermadeMarketIndexRecession 0.2 7 -22 28 10 -13Below Average 0.1 7 -2 14.7 -10 1Average 0.3 7 20 0 7 15Above Average 0.3 7 35 -10 45 29Boom 0.1 7 50 -20 30 43MeanStandard DeviationCoefficient of VariationCovariance with MPCorrelation with Market IndexBetaCAPM Req. ReturnValuation(Overvalued/Undervalued/FairlyValued)Nature of stock(Aggressive/Defensive)Question 1 Fill the parts in the above table that are shaded in yellow. You will notice that there are nineline items. Each line item is worth 2 marksQuestion 2 Using the data generated in the previous question (Question 1);a) Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above and…
Consider the following information about the various states of economy and the returns ofvarious investment alternatives for each scenario. Answer the questions that follow.% Return on T-Bills, Stocks and MarketIndexState of the Economy Probability TBills Phillips PayupRubbermadeMarketIndexRecession 0.2 7 -22 28 10 -13Below Average 0.1 7 -2 14.7 -10 1Average 0.3 7 20 0 7 15Above Average 0.3 7 35 -10 45 29Boom 0.1 7 50 -20 30 43MeanStandard DeviationCoefficient of VariationCovariance with MPCorrelation with Market IndexBetaCAPM Req. ReturnValuation(Overvalued/Undervalued/FairlyValued)Nature of stock(Aggressive/Defensive)Question 1 Fill the parts in the above table that are shaded in yellow. You will notice that there are nineline items. Question 2 Using the data generated in the previous question (Question 1);a) Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above and below the SML? d) If an…
Investment Expected Return Standard Deviation1 0.12 0.302 0.15 0.503 0.21 0.164 0.24 0.21Based on the utility formula we covered in lectures,a. Calculate the utility of each investment alternative for an investor with risk averse A=4:The utility of Investment 1The utility of Investment 2The utility of Investment 3The utility of Investment 4b. State which investment you would select if you were risk averse with A=4: Blank 5. Fill in the blank, read surrounding text. c. State which investment you would select if you were risk averse with A=2: Blank 6. Fill in the blank, read surrounding text.. d. State which investment you would select if you were risk neutral: Blank 7. Fill in the blank, read surrounding text.
Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Recession 0.11 -0.06 Normal 0.45 0.15 Boom 0.44 0.32 Calculate the expected return.
H3. Compute the standard deviation of the expected return given these three economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast Growth 0.2 30% Slow Growth 0.5 6% Recession 0.3 −2% Please show proper step by step calculation
State ofEconomy Probabilityof State Return on AssetDin State Return on AssetEin State Return on AssetFin State Boom 0.35 0.060 0.310 0.25 Normal 0.50 0.060 0.180 0.20 Recession 0.15 0.060 -0.210 0.10 A. Calculate the expected return (mean) for each security.
Q11. n is the number of periods of an investment, PV is the starting value, FVn is the future value n periods ahead, and ^ means 'to the power of'. What is the correct formula for calculating return? Group of answer choices 1. (FVn/PV)^n - 1 2. (FVn/PV)^n 3. (PV/FVn)^n - 1 4. 1 - (FVn/PV)^n
Consider the following information: Probability of State of Economy Portfolio Return If State Occurs State of Economy Recession 23 -11 Normal .47 .13 Boom 30 .32 Calculate the expected return.
Supposing the return from an investment has the following probability distribution Return Probability R (%) 8 0.2 10 0.2 12 0.5 14 0.1 Required: What is the expected return of the investment? What is the risk as measured by the standard deviation of expected returns?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS