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.)
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.)
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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