Question
In: Finance
Consider the following information on Stocks I and II: State of Economy Probability of State of...
Consider the following information on Stocks I and II: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock I Stock II Recession .24 .030 −.34 Normal .59 .340 .26 Irrational exuberance .17 .200 .44 The market risk premium is 11.4 percent, and the risk-free rate is 4.4 percent. Requirement 1: (a) Calculate the beta and standard deviation of Stock I. (Do not round intermediate calculations. Enter the standard deviation as a percentage. Round your answers to 2 decimal places (e.g., 32.16).) Stock I Beta Standard deviation % (b) Calculate the beta and standard deviation of Stock II. (Do not round intermediate calculations. Enter the standard deviation as a percentage. Round your answers to 2 decimal places (e.g., 32.16).) Stock II Beta Standard deviation % Requirement 2: (a) Which stock has the most systematic risk? (b) Which one has the most unsystematic risk? (c) Which stock is “riskier”?
Solutions
jeff jeffy answered 10 months agoRelated Solutions
Consider the following information on Stocks I and II: State of Economy Probability of State of...
Consider the
following information on Stocks I and II:
State of Economy
Probability of
State of Economy
Rate of Return if
State Occurs
Stock I
Stock II
Recession
.20
.02
−.20
Normal
.55
.32
.12
Irrational exuberance
.25
.18
.40
The market risk premium is 7 percent, and the risk-free rate is
4 percent.
Calculate the beta and standard deviation for both stocks
Also include which one has more systematic risk, and which is
riskier?
Consider the following information on Stocks I and II: State of Economy Probability of State of...
Consider the following information on Stocks I and II:
State of Economy
Probability of
State of Economy
Rate of Return if State Occurs
Stock I
Stock II
Recession
.22
.055
−.27
Normal
.67
.355
.19
Irrational exuberance
.11
.215
.47
The market risk premium is 11.7 percent, and the risk-free rate is
4.7 percent.
Requirement 1:
(a)
Calculate the beta and standard deviation of Stock I. (Do not round
intermediate calculations. Enter the standard deviation as a
percentage. Round your...
Consider the following information about Stocks I and II: State of Economy Probability of state of...
Consider the following information about Stocks I and II:
State of Economy
Probability of state of economy
Stock 1
Stock 2
Recession
0.28
0.05
-0.20
Normal
0.53
0.17
0.07
Irrational Exuberance
0.19
0.06
0.40
The market risk premium is 8 percent, and the risk-free rate is
2 percent.
The standard deviation on Stock 1's return is ________ percent,
and the Stock 1 beta is _________. The standard deviation on Stock
2's return is ________ percent, and the Stock 2 beta...
Consider the following information on Stocks I and II: State of Probability of Rate of Return...
Consider the following information on Stocks I and II:
State of Probability of Rate of Return if State Occurs
Economy State of Economy Stock I Stock II
Recession .21 .015 ? .31
Normal .56 .325 .23
Irrational exuberance .23 .185 .41
The market risk premium is 11.1 percent, and the risk-free rate
is 4.1 percent.
Calculate the beta and standard deviation of Stock I. (Do not round
intermediate calculations. Enter the standard deviation as a
percent and round both answers...
Consider the following information on Stocks I and II: State of Probability of Rate of Return...
Consider the following information on Stocks I and II:
State of
Probability of
Rate of Return if State Occurs
Economy
State of Economy
Stock I
Stock II
Recession
.27
.030
?
.22
Normal
.62
.330
.14
Irrational exuberance
.11
.190
.42
The market risk premium is 11.2 percent, and the risk-free rate
is 4.2 percent.
Calculate the beta and standard deviation of Stock I. (Do
not round intermediate calculations. Enter the standard deviation
as a percent and round both answers...
Consider the following information on Stocks I and II: State of Probability of Rate of Return...
Consider the following information on Stocks I and II:
State of
Probability of
Rate of Return if State Occurs
Economy
State of Economy
Stock I
Stock II
Recession
.22
.045
−
.37
Normal
.62
.355
.29
Irrational exuberance
.16
.215
.47
The market risk premium is 11.7 percent, and the risk-free rate
is 4.7 percent.
Calculate the beta and standard deviation of Stock I. (Do
not round intermediate calculations. Enter the standard deviation
as a percent and round both answers...
Consider the following information on Stocks I and II: Rate of Return If State Occurs Probability...
Consider the following information on Stocks I and II:
Rate of Return If State Occurs
Probability of
State of Economy
State of Economy
Stock I
Stock II
Recession
.35
.03
-.23
Normal
.30
.39
.14
Irrational exuberance
.35
.33
.49
The market risk premium is 10 percent, and the risk-free rate
is 4.5 percent.
1-a.
What is the beta of each stock? (Do not round
intermediate calculations. Round your answers to 2 decimal
places.)
Beta
Stock I
Stock II...
Consider the following information on 3 stocks. State of the economy Probability of state of economy...
Consider the following information on 3 stocks.
State of the economy
Probability of state of economy
Return of stock A
Return of Stock B
Return of Stock C
Recession
0.20
.24
.36
.55
Normal
0.55
.17
.13
.09
Boom
0.25
0
-.28
-.45
If your portfolio is invested 40% in A , 40% in B and 20% in C.
What is the portfolio expected return?
What is the portfolio standard deviation?
If the expected t-bill rate is 3.8%, what is...
Consider the following information on three stocks: State of Economy Probability of State of Economy Rate...
Consider the following information on three stocks:
State of
Economy
Probability of
State of Economy
Rate of Return
if State Occurs
Stock A
Stock B
Stock C
Boom
.25
.27
.15
.11
Normal
.65
.14
.11
.09
Bust
.10
−.19
−.04
.05
A portfolio is invested 45 percent each in Stock A and Stock B
and 10 percent in Stock C. What is the expected risk premium on the
portfolio if the expected T-bill rate is 4.1 percent?
A.
8.71...
consider the following information about three stocks: state of economy. probability of state of &
consider the following information about three
stocks:
state of economy. probability of state
of
economy
boom.
0.20
normal.
0.55
bust.
0.25
rate of return if state occurs
stock
A.
Stock
B.
stock C
0.38.
0.50.
0.50
0.16.
0.14.
0.12
0.00.
-0.30.
-0.50
a-1. if your portfolio is invested 30%each in A and B
and 40% in C, what is the portfolio expected return?
a-2. what is the variance?
a-3. what is the standard deviation?
b. if the expected T-bill...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Young and Company claims that its pressurized diving bell will, on average, maintain its integrity to...
- 1) Alternative compiled code sequence using instructions in classes A, B, C. What is the average...
- An asset is purchased on January 1 for $48,700. It is expected to have a useful...
- Do we have any online or offline tool to convert c and cpp programs into MIPS...
- -what is the pH of HCl 0,1M and NaCl 0,1M mixed together solution? -What is the...
- function X=extractDWT(x_train,startS,endS,wStep,wRange) % x_train = input signal % startS = from second % endS = end...
- Do you agree that Social Loafing is similar to Theory X. Give an example to support...
ADVERTISEMENT