Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 13, Problem 6QP
Summary Introduction
To determine: The expected return on the stock.
Introduction:
Expected return refers to the return that the investors expect on a risky investment in the future.
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Students have asked these similar questions
Consider the following information:
State of Economy
Probability of State of Economy
Rate of Return if State Occurs
Recession
0.11
-0.06
Normal
0.45
0.15
Boom
0.44
0.32
Calculate the expected return.
Consider the following information:
Probability of
State of Economy
Portfolio Return
If State Occurs
State of Economy
Recession
23
-11
Normal
.47
.13
Boom
30
.32
Calculate the expected return.
Consider the following information:
State ofEconomy
Probability ofState of Economy
Rate of Returnif State Occurs
Recession
.37
−.11
Boom
.63
.23
Calculate the expected return.
Chapter 13 Solutions
Fundamentals of Corporate Finance
Ch. 13.1 - How do we calculate the expected return on a...Ch. 13.1 - In words, how do we calculate the variance of the...Ch. 13.2 - What is a portfolio weight?Ch. 13.2 - How do we calculate the expected return on a...Ch. 13.2 - Is there a simple relationship between the...Ch. 13.3 - What are the two basic parts of a return?Ch. 13.3 - Under what conditions will a companys announcement...Ch. 13.4 - Prob. 13.4ACQCh. 13.4 - Prob. 13.4BCQCh. 13.5 - What happens to the standard deviation of return...
Ch. 13.5 - What is the principle of diversification?Ch. 13.5 - Why is some risk diversifiable? Why is some risk...Ch. 13.5 - Why cant systematic risk be diversified away?Ch. 13.6 - Prob. 13.6ACQCh. 13.6 - What does a beta coefficient measure?Ch. 13.6 - True or false: The expected return on a risky...Ch. 13.6 - How do you calculate a portfolio beta?Ch. 13.7 - Prob. 13.7ACQCh. 13.7 - What is the security market line? Why must all...Ch. 13.7 - Prob. 13.7CCQCh. 13.8 - If an investment has a positive NPV, would it plot...Ch. 13.8 - What is meant by the term cost of capital?Ch. 13 - Prob. 13.1CTFCh. 13 - Prob. 13.5CTFCh. 13 - Beta is a measure of what?Ch. 13 - The slope of the security market line is equal to...Ch. 13 - Where would a negative net present value project...Ch. 13 - Prob. 1CRCTCh. 13 - Prob. 2CRCTCh. 13 - Systematic versus Unsystematic Risk [LO3] Classify...Ch. 13 - Systematic versus Unsystematic Risk [LO3] Indicate...Ch. 13 - Prob. 5CRCTCh. 13 - Diversification [LO2] True or false: The most...Ch. 13 - Portfolio Risk [LO2] If a portfolio has a positive...Ch. 13 - Beta and CAPM[LO4] Is it possible that a risky...Ch. 13 - Corporate Downsizing [LO1] In recent years, it has...Ch. 13 - Earnings and Stock Returns [LO1] As indicated by a...Ch. 13 - Determining Portfolio Weights [LO1] What are the...Ch. 13 - Portfolio Expected Return [LO1] You own a...Ch. 13 - Portfolio Expected Return [LO1] You own a...Ch. 13 - Prob. 4QPCh. 13 - Prob. 5QPCh. 13 - Prob. 6QPCh. 13 - Calculating Returns and Standard Deviations [LO1]...Ch. 13 - Calculating Expected Returns [LO1] A portfolio is...Ch. 13 - Returns and Variances [LO1] Consider the following...Ch. 13 - Returns and Standard Deviations [LO1] Consider the...Ch. 13 - Calculating Portfolio Betas [LO4] You own a stock...Ch. 13 - Calculating Portfolio Betas [LO4] You own a...Ch. 13 - Using CAPM[LO4] A stock has a beta of 1.15, the...Ch. 13 - Using CAPM[LO4] A stock has an expected return of...Ch. 13 - Using CAPM [LO4] A stock has an expected return of...Ch. 13 - Using CAPM [LO4] A stock has an expected return of...Ch. 13 - Using the SML[LO4] Asset W has an expected return...Ch. 13 - Reward-to-Risk Ratios [LO4] Stock Y has a beta of...Ch. 13 - Reward-to-Risk Ratios [LO4] In the previous...Ch. 13 - Using CAPM [LO4] A stock has a beta of 1.14 and an...Ch. 13 - Portfolio Returns [LO2] Using information from the...Ch. 13 - Prob. 22QPCh. 13 - Portfolio Returns and Deviations [LO2] Consider...Ch. 13 - Analyzing a Portfolio [LO2, 4] You want to create...Ch. 13 - Analyzing a Portfolio [LO2, 4] You have 100,000 to...Ch. 13 - Systematic versus Unsystematic Risk [LO3] Consider...Ch. 13 - SML [LO4] Suppose you observe the following...Ch. 13 - SML [LO4] Suppose you observe the following...Ch. 13 - Prob. 1MCh. 13 - Beta is often estimated by linear regression. A...Ch. 13 - Prob. 3MCh. 13 - Prob. 4MCh. 13 - Prob. 5M
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Similar questions
- Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Recession .21 −.04 Normal .65 .16 Boom .14 .22 Calculate the expected return. Multiple Choice 13.15% 2.27% 12.64% 13.27% 12.01%arrow_forwardConsider the following information: State of Probability of Portfolio Return Economy State of Economy If State Occurs Recession <- Boom 21 .79 Expected return Calculate the expected return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 11 .21 %arrow_forwardH3. Compute the standard deviation of the expected return given these three economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast Growth 0.2 30% Slow Growth 0.5 6% Recession 0.3 −2% Please show proper step by step calculationarrow_forward
- Considering the following information gathered: State of Economy Probability of State of Economy Rate of Return if State Occurs Recession 0.11 -0.03 Normal 0.45 0.16 Boom 0.44 0.29 Please Calculate the expected return. Multiple Choice 18.65% 2.80% 19.63% 20.61% 20.42%arrow_forwardes Consider the following information: State of Economy Recession Boom Probability of State of Expected return Economy .28 72 Portfolio Return if State Occurs Calculate the expected return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) -.13 .23 %arrow_forward11.6 Calculating Returns and Standard Deviations Based on the following information, calculate the expected return and standard deviation: State of Economy Probability of SE Rate of Return If State Occurs Depression .15 -.148 Recession .30 .031 Normal .45 .162 Boom .10 .348arrow_forward
- Consider the following information: State of Economy Recession Normal Boom Probability of State of Expected return Economy .17 .53 .30 Portfolio Return if State Occurs -.13 Calculate the expected return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % 14 .22arrow_forwardState ofEconomy Probability of Stateof Economy Rate of Returnif State Occurs Recession .24 –.10 Normal .46 .12 Boom .30 .31 Calculate the expected return.arrow_forwardConsider the following information: State of Economy Recession Normal Boom Probability of Portfolio State of Return if State Economy Occurs .21 -15 .46 .33 .11 .37 Calculate the expected return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return %arrow_forward
- Consider the following information: State of Economy Recession Normal Boom Probability of State of Economy .22 .48 .30 Expected return Rate of Return if State Occurs Calculate the expected return. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decima % -.12 .14 .33arrow_forwardes Consider the following information: State of Economy Recession Boom Probability of State of Economy .36 .64 Expected return Rate of Return if State Occurs Calculate the expected return. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. % -.10 .22arrow_forwardBased on the following information, what is the standard deviation of returns? State of Economy Probability of Stateof Economy Rate of Return ifState Occurs Recession .28 − .096 Normal .41 .111 Boom .31 .221arrow_forward
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