stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to re 3 percent in comparison to 14 percent in a normal economy and a negative 18 percent in a recessionary period. The proba of a recession is 18 percent while the probability of a boom is 22 percent. What is the standard deviation of the returns on t =tock? 12.08 percent 15.83 percent 13.71 percent 11.56 percent

If the economy booms, RTF, Incorporated, stock is expected to return 10 percent. If the economy goes into a recessionary period, then RTF is expected to 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 on RTF, Incorporated, stock?

Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 33% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 4%. Calculate the utility levels of each portfolio for an investor with A = 2. Assume the utility function is U = E(r) Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Negative amounts should be indicated by a minus sign. - 0.5 × Ag². X Answer is complete but not entirely correct. WIndex U(A = 2) 0.0111 0.0504 0.0808 x 0.1026 0.1164 X 0.1200 X WBills 0.0 0.2 0.4 0.6 0.8 1.0 1.0 0.8 0.6 0.4 0.2 0.0

A stock can either return -10% in recession or a +20% when the economy is doing well. If both possibilities are equally likely what is the expected return and standard deviation. If the T.Bill rate is 5% and investors conlude that that the stock is neither overpriced or underpriced )priced right), what must be the market risk of the stock. Explain.

Suppose your expectations regarding the stock market are as follows: State of the Economy Boom Normal growth Recession E (r) = Σs=1 P(s)r(s) Var (r) = ² = Probability 0.3 0.4 0.3 Σs ₁ p (s)[r (s)- E (r)]² HPR 44% 14 -16 SD (r) = 0 = Var (r) Required: Use above equations to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Consider the following information on Stocks I and II: State of Economy Recession Normal Irrational exuberance Probability of State of Economy .30 .40 .30 Rate of Return If State Occurs The standard deviation of Stock I's expected return is percent, and the Stock II beta is Stock I .10 .17 .11 The market risk premium is 8 percent, and the risk-free rate is 3 percent. Note: Do not round intermediate calculations. Enter your standard deviation answers as a percent rounded to 2 decimal places, e.g., 32.16. Round your beta answers to 2 decimal places, e.g., 32.16. Stock II -.25 .12 .45 percent, and the Stock I beta is is "riskier". Therefore, Stock Il The standard deviation of Stock Il's exp

Consider the following information: State of Economy Boom Bust Probability of State of Economy .72 .28 Rate of Return if State Occurs Stock A .10 .19 Stock B Stock C .04 .30 .25 -.10 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal pla b. What is the variance of a portfolio invested 27 percent each in A and B and 46 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. a. Expected return b. Variance of portfolio % 3