Adequate information:
Probability in Bear
Probability in Normal
Probability in Bull
Expected return for Stock J in Bear
Expected return for Stock J in Normal
Expected return for Stock J in Bull
Expected return for Stock K in Bear
Expected return for Stock K in Normal
Expected return for Stock K in Bull
To compute: Expected return, standard deviation, covariance, and correlation.
Introduction: The expected return of the stocks refers to the return expected on the stocks. Standard deviation measures the deviation between the actual prices and the average price. Covariance reflects the relationship of two random variables and projects the impact of one variable whenever the other one changes. Correlation refers to the degree of fluctuation of two variables in relation to one another.
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Corporate Finance
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- When working with the CAPM, which of the following factors can be determined with the most precision? a. The beta coefficient of "the market," which is the same as the beta of an average stock. b. The beta coefficient, bi, of a relatively safe stock. c. The market risk premium (RPM). d. The most appropriate risk-free rate, rRF. e. The expected rate of return on the market, rM.arrow_forwardThe Beta coefficients of TSLA and JPM are 1.99 and 1.18 respectively. What does Beta measure and how is it interpreted? Explain the beta values of TSLA and JPM by providing a calculated example of how they relate to market returns.arrow_forwardBased on the information, calculate expected returns for each share, variance for each share and standard deviation for each sharearrow_forward
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