The stock of Business Adventures sells for $50 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows: Dividend Stock Price Boom $ 3.00 $ 58 Normal economy 1.40 52 Recession 0.70 43 Required: a Calculate the expected holding - period return and standard deviation of the holding - period return. All three scenarios are equally likely. (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury bills. The return on bills is 3%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 8P
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The stock of Business Adventures sells for $50 a share.
Its likely dividend payout and end-of-year price
depend on the state of the economy by the end of the
year as follows: Dividend Stock Price Boom $ 3.00 $ 58
Normal economy 1.40 52 Recession 0.70 43 Required: a
Calculate the expected holding - period return and
standard deviation of the holding - period return. All
three scenarios are equally likely. (Do not round
intermediate calculations. Round your answers to 2
decimal places.) b. Calculate the expected return and
standard deviation of a portfolio invested half in
Business Adventures and half in Treasury bills. The
return on bills is 3%. (Do not round intermediate
calculations. Round your answers to 2 decimal places.)
Transcribed Image Text:The stock of Business Adventures sells for $50 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows: Dividend Stock Price Boom $ 3.00 $ 58 Normal economy 1.40 52 Recession 0.70 43 Required: a Calculate the expected holding - period return and standard deviation of the holding - period return. All three scenarios are equally likely. (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury bills. The return on bills is 3%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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