Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question
Stock W has the following returns for various states of the economy:
Compute standard deviation for this stock.
State of the Economy
Probability
Stock W's Return
Recession
10%
-30%
Below Average
20%
-2%
Average
40%
10%
Above Average
20%
18%
Boom
10%
40%
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- Stock W has the following returns for various states of the economy: State of the Economy Probability Stock W's Return Recession 0.15 -10% Below Average 0.20 5% Average 0.30 8% Above Average 0.25 12% Boom 0.10 18% Stock W’s Sharpe ratio assuming the risk-free is 1.25%arrow_forwardGiven the following information, what is the standard deviation (in percent) of the returns on this stock? Carry intermediate calculations to at least five decimals. Answer to two decimals Probability of State State of Economy Rate of Return (%) of Economy Recession 15% -12.34 Normal 60% 14.14 Boom 25% 23.77arrow_forwardCalculate the correlation coefficient (PAB) for the following situation: (Round intermediate calculations and the final answer to 4 decimal place, e.g. 0.2921.) State of the Probability of Expected return on Expected return on economy occurrence stock A in this state stock B in this state High growth 30% 39.5% 56.5% Moderate 25% 18.5% 26.5% Recession 45% -6.5% -16.5% Correlation coefficientarrow_forward
- Northern Wear stock has an expected return of 14.6 percent. Given the information below, what is the expected return on this stock if the economy is normal? Probability of State of Economy .15 State of Economy Rate of Return Recession Normal -05 .80 Воom .05 .19 O 13 percent O 16 percent 18 percent O 21 percent O 23 percentarrow_forwardReview the following market information: Current Stock Market Return 11.25% Current T-Bill Price $979.43 Historic T-Bill Average Return 2.80% Historic Stock Market Average Return 8.10% Stock Beta 1.23 What is the required return (rounded to two places)?arrow_forwardCurrent Attempt in Progress To achieve a zero standard deviation for a portfolio, calculate the weights of stock A and stock B, assuming the correlation coefficient is-1. Use the following information. (Round intermediate calculations and final answers to 2 decimal places, e.g. 31.21%.) State of the economy Probability of Expected return on Expected return on occurrence stock A in this state stock B in this state High growth 30% 41.5% 56.5% Moderate growth 25% 21.5% 26.5% Recession 45% -11.5% -21.5% Weight of stock A % Weight of stock B %arrow_forward
- Read the information for 3 stocks X, Y and Z below. Rate of return when state occurs (For Stock X, Y, and Z) State of Economy Probability of State Stock X Stock Y Stock Z Boom 0.3 0.4 0.45 0.6 Normal 0.5 0.2 0.15 0.08 Recession 0.2 0 -0.3 -0.4 If your portfolio includes 35 percent of X, 40 percent of Y and 25 percent of Z, answerthe following questions: (a) Calculate the portfolio expected return.(b) Calculate the variance and the standard deviation of the portfolio (c) If the expected T-bill rate is 3.80 percent, calculate the expected risk premiumon the portfolio.arrow_forwardForecasted returns for Stock A: State of the Economy Prob. of State Return in State Prosperity 35% 5% Normal 45% 14% Recession 20% -3% What is the standard deviation of the stock’s returns?arrow_forwardConsider the following information: Economy Recession Normal Boom Probability of State of Economy .21 .56 .23 Rate of Return if State Occurs Stock A Stock B a. Expected return of A Expected return of B b. Standard deviation of A Standard deviation of B .015 .095 .250 a. Calculate the expected return for the two stocks. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. -.36 .26 .49 b. Calculate the standard deviation for the two stocks. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. % % %arrow_forward
- Consider the following data State of Nature Prob. Stock A Return Boom 0.3 16.00% Normal 0.6 14.20% Recession 0.1 8.00% What is the expected return for Stock A? Group of answer choices 14.12% 12.14% 15.12% 14.00%arrow_forwardView Policies Current Attempt in Progress Calculate the correlation coefficient (PA) for the following situation: (Round intermediate calculations and the final answer to 4 decimal place, e.g. 0.2921.) State of the economy High growth Moderate Recession Probability of Expected return on occurrence stock A in this state 47.0% 26.0% -14.0% 25% 20% 55% Correlation coefficient Expected return on stock B in this state 64.0% 34.0% -24.0%arrow_forwardcalculate the expected return Rate of return State of Economy Probability Stock A Stock B Recession 0.15 1.00% -0.25 Normal 0.55 9.00% 0.15 Boom 0.30 14.00% 0.38arrow_forward
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