If the economy booms, RTF, Incorporated, stock is expected to return 10 percent. If the economy goes into a recessionary period, then RTF is expectedto only return 3 percent. The probability of a boom is 65 percent while the probability of a recession is 35 percent. What is the variance of the returns onRTF, Incorporated, stock?Multiple Choice.001115.033388.000334.037750.000725

To determine variance of the returns on RTF, Incorporated stock, the formula for the variance of a…

Answered: If the economy booms, RTF,…

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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If the economy booms, RTF, Inc., stock is expected to return 11 percent. If the economy goes into a recessionary period, then RTF is expected to only return 2 percent, The probability of a boom is 74 percent while the probability of a recession is 26 percent. What is 13 the variance of the returns on RTF, Inc., stock? ◄OU 0.0433 0.001153 C 0.000748 D 0.001558 E 0.039477 B
If the economy is normal, Charleston Freight stock is expected to return 16.5 percent. If the economy falls into a recession, the stock's return is projected at a negative 11.6 percent. The probability of a normal economy is 80 percent while the probability of a recession is 20 percent. What is the variance of the returns on this stock? a. 0.013420b. 0.013927c. 0.010346d. 0.012634
Given the following information, what is the variance of the returns on this stock? State of Economy Probability of State of Economy Rate of Return Boom .30 .18 Normal Recession .65 .11 .05 -.06 O 0.002453 O 0.002663 0.002691 0.002759 O 0.002914
The returns on shares of Valley Transporter are predicted under the following various economic conditions: Recession -0.11 Normal +0.08 Boom +0.25 If each economy state has the same probability of occurring (33.33%), what is the variance of the stock?
XYZ stock's returns will have the following probability distribution during the possible states of the economy.a. Calculate the expected return on XYZ stock.b. Calculate the standard devivation of XYZ stock returns.c. Calculate the coefficient of variation of XYZ stock.State of Economy Probability Return Boom 15% 22.75% Normal 70% 12.60% Recession 15% -15.20% Expected Return: % Standard Deviation: Coefficient of Variation:
If economy booms, RTF, Inc. stock is expected to return 11 percent. If the economy goes into a recessionary period, then RTF is expected to only return 3 percent. The probability of boom is 73 percent while the probability of a recession is 27 percent. What is the variance of the returns on RTF?
What is the variance on a stock that has expected rate of return of 18% in a boom economy, 8% in a normal economy, and 2% in a recession. The probability of these economies are 12% for a boom, 78% for a normal and 10% for a recession?
The rate of return on the common stock of Kang Distribution is expected to be 13.5 percent in a boom economy, 8 percent in a normal economy, and only 2.5 percent in a recessionary economy. The probabilities of these economic states are 11 percent for a boom and 26 percent for a recession. What is the variance of the returns on this common stock?
Shepherd's Flock stock is expected to produce the following returns given the various states of the economy. What is the expected return on this stock? State of economy Probability of State of Economy Rate of Return Recession .3 -.27 Normal .65 .16 Boom .05 .35
10) Based on the past 3 years’ weekly returns, we find the covariance of a firm’s return with market return is 0.5, the variance of firm’s stock returns is 0.4, and the variance of market returns is 0.2. Based on a 5% expected market return, and a 1% risk-free rate, what should be the expected stock return of the firm?
Consider the following information: Rate of Return If State Occurs State of Probability of State of Economy Economy Boom .60 Stock A .08 Stock B .16 Stock C .34 Bust .40 .18 .08 -.07 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the variance of a portfolio invested 18 percent each in A and B and 64 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.) a. Expected return % b. Variance
You have the following stock with expected returns given the different economic outcomes. What is the overall standard deviation of returns? Probability Economic state Recession Normal Boom 25% I 50% 25% Return -5% 8% 25%

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