8-1EXPECTED RETURN A stock's returns have the following distribution:Demand for theCompany's ProductsWeakBelow averageProbability of thisDemand Occurring0.1Rate of Return if thisDemand Occurs(30%)0.1(14)AverageAbove averageStrong0.3110.3200.2451.0Assume the risk-free rate is 2%. Calculate the stock's expected return, standard deviation,coefficient of variation, and Sharpe ratio.

Expected rate of return:It is difficult to arrive at a single accurate figure of the rate of return…

Demand for the Company's Products Probability of this Demand Occurring Weak 0.1 Rate of Return if this Demand Occurs (30%) Below average 0.1 (14) Average 0.3 11 Above average 0.3 20 Strong 0.2 45 1.0 Assume the risk-free rate is 2%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio.

Demand for the Company's Products Probability of this Demand Occurring Weak 0.1 Rate of Return if this Demand Occurs (30%) Below average 0.1 (14) Average 0.3 11 Above average 0.3 20 Strong 0.2 45 1.0 Assume the risk-free rate is 2%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio.

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. Problem 8.01 (Expected Return) A stock's returns have the following distribution: Demand for theCompany's Products Probability of thisDemand Occurring Rate of Return ifthis Demand Occurs Weak 0.1 (22%) Below average 0.2 (14) Average 0.3 13 Above average 0.3 27 Strong 0.1 47 1.0 Assume the risk-free rate is 3%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places. Stock's expected return: % Standard deviation: % Coefficient of variation: Sharpe ratio:
A stock’s returns have the following distribution:Demand for theCompany’s ProductsProbability of thisDemand OccurringRate of Return if thisDemand OccursWeak 0.1 (30%)Below average 0.1 (14)Average 0.3 11Above average 0.3 20Strong 0.2 451.0Assume the risk-free rate is 2%. Calculate the stock’s expected return, standard deviation,coefficient of variation, and Sharpe ratio.
Expected Return: Discrete Distribution A stock's return has the following distribution: Demand for theCompany's Products Probability of ThisDemand Occurring Rate of Return if ThisDemand Occurs (%) Weak 0.1 -20% Below average 0.2 -8 Average 0.4 6 Above average 0.2 30 Strong 0.1 65 1.0 Calculate the stock's expected return. Round your answer to two decimal places. % Calculate the standard deviation. Round your answer to two decimal places. %
Subject: Financial strategy & policy 8-1: EXPECTED RETURN A stock’s returns have the following distribution: Demand for theCompany’s Products Probability of ThisDemand Occurring Rate of Return If ThisDemand Occurs Weak 0.1 (50%) Below average 0.2 (5) Average 0.4 16 Above average 0.2 25 Strong 0.1 60 1.0 Calculate the stock’s expected return, standard deviation, and coefficient of variation.
8.1 A stock's returns have the following distribution: Demand for theCompany's Products Probability of ThisDemand Occurring Rate of Return IfThis Demand Occurs Weak 0.1 (36%) Below average 0.1 (14) Average 0.6 14 Above average 0.1 30 Strong 0.1 73 1.0 Assume the risk-free rate is 2%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places. Stock's expected return: % Standard deviation: % Coefficient of variation: Sharpe ratio:
EXPECTED RETURN A stock’s returns have the following distribution: Demand For the Company’sProducts Probability of this D-emandOccurring Rate of Return if thisDemand Occurs Weak 0.1 (3%) Below average 0.1 (14) Average 0.3 11 Above average 0.3 20 Strong 0.2 45 1.0 Assume the risk-free rate is 2%. Calculate the stock’s expected return, standard deviation , coefficient of variation, and Sharpe ratio.
Expected Return: Discrete Distribution A stock's return has the following distribution: Demand for the Company's Products Probability of This Demand Occurring Rate of Return if This Demand Occurs (%) Weak 0.1 -25% Below average 0.2 -8 Average 0.4 7 Above average 0.2 35 Strong 0.1 60 1.0 Calculate the stock's expected return. Round your answer to two decimal places.___% Calculate the standard deviation. Round your answer to two decimal places.___%
Problem 8.06 (Expected Returns) Stock A and Bs have the following profitability distributions of expected future returns's Profitability 0.1 0.1 0.5 0.2 0.1 A (890) 니 16 18 31 B (20%) 0 20 27 37 a) Calculate the expected rate of return, FB, for stock B3 (FA= 14,30%) b) Calculate the standard denation of expected returns, OA, for stock A (OB = 15.18% 2 Now calculate the coefficient of variation for stock B. C) Assume the risk-rate is 1.5% What are the Sharpe rutius for Stacks A and B? Stock A. Stock Bi
Expected Returns: Discrete Distribution The market and Stock J have the following probability distributions: Probability rM rJ 0.3 15% 20% 0.4 9 7 0.3 18 10 Calculate the expected rates of return for the market and Stock J. Round your answers to one decimal place. Expected rate of return (Market): % Expected rate of return (Stock J): % Calculate the standard deviations for the market and Stock J. Do not round intermediate calculations. Round your answers to two decimal places. Standard deviation (Market): % Standard deviation (Stock J): %
Find the required rate of return on the market if: beta is 1.23, required return on the stock is 9.50%, and risk-free rate is 2.30% A. 9.87% B. 8.40% C. 8.15% D. 8.72% E. 8.32%
EXPECTED RETURN A stock's returns have the following distribution: Demand for the Company's Products Weak Below average Average Above average Strong Probability of This Demand Occurring Rate of Return If This Demand Occurs 0.1 0.2 0.4 0.1 0.2 1.0 a. Calculate the stock's expected return. Round your answer to two decimal places. % (44%) (13) 17 26 52 b. Calculate the stock's standard deviation. Do not round intermediate calculations. Round your answer to two decimal places. % c. Calculate the stock's coefficient of variation. Round your answer to two decimal places.
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

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