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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Ans ? Financial accounting question

Transcribed Image Text:The stock of Blue Water Tours, Inc. is expected to return 23%
in a booming economy, 18% in a normal economy, and lose
17% in a recessionary economy. What is the expected rate of
return on this stock if there is a 10% chance the economy
booms, and an 86% chance the economy will be normal?
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- The common stock of Manchester & Moore is expected to earn 16.2 percent in a recession, 8 percent in a normal economy, and lose 3.5 percent in a booming economy. The probability of a boom is 18 percent while the probability of a recession is 7 percent. What is the expected rate of return on this stock?arrow_forwardIf the economy booms, Meyer&Co. stock will have a return of 20.9 percent. If the economy goes into a recession, the stock will have a loss of 13.2 percent. The probability of a boom is 62 percent while the probability of a recession is 38 percent. What is the standard deviation of the returns on the stock?arrow_forwardAssume the economy has an 6 percent chance of booming, am 8 percent chance of being recessionary, and being normal the remainder of the time. A stock is expected to return 22.5 percent in a boom, 11.5 percent in a normal economy, and −8 percent in a recession. What is the expected rate of return on this stock?arrow_forward
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- According to equity analysts at Goldman Sachs, over the next year, there is a 13% chance of an economic boom and a 75% likelihood of a normal economy. You just bought shares of Time Warner (ticker symbol: TWX) that are expected to earn 14% in a booming economy and 8% in a normal economy. What is Time Warner’s expected return if the company is expected to lose 4% in a recessionary economy? a. 7.69 b. 7.34 c. 6.43 d. 4.00 e. 8.30arrow_forwardWhat is the expected return on a stock if the firm will earn 24% during a period of economic boom, 14% during normal economic periods, and 2% during a period of recession if the probabilities of these economic environment are 20%, 65% and 15%, respectively?arrow_forwardPlease Solve In 15minsarrow_forward
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