In: Finance
The stock of Business Adventures sells for $25 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 | $1.50 | $35 |
Normal economy | 1.10 | 30 |
Recession | .55 | 21 |
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.) |
Expected return | % |
Standard deviation | % |
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.) |
Expected return | % |
Standard deviation | % |