Question
In: Finance
You are given the following information: State of Economy Return on Stock A Return on...
| You are given the following information: |
| State of Economy |
Return on Stock A |
Return on Stock B |
| Bear | .119 | −.062 |
| Normal | .098 | .165 |
| Bull | .090 | .250 |
| Assume each state of the economy is equally likely to happen. |
|
Calculate the expected return of each of the following stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Expected return | |
| Stock A | % |
| Stock B | % |
|
Calculate the standard deviation of each of the following stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Standard deviation | |
| Stock A | % |
| Stock B | % |
|
What is the covariance between the returns of the two stocks? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 6 decimal places, e.g., 32.161616.) |
| Covariance |
|
What is the correlation between the returns of the two stocks? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) |
| Correlation |
Solutions
jeff jeffy answered 4 weeks agoRelated Solutions
You are given the following information: State of Economy Return on Stock A Return on Stock...
You are given the following information:
State of
Economy
Return on
Stock A
Return on
Stock B
Bear
.109
−
.052
Normal
.108
.155
Bull
.080
.240
Assume each state of the economy is equally likely to happen.
Calculate the expected return of each stock. (Do not round
intermediate calculations. Enter your answers as a percent rounded
to 2 decimal places, e.g., 32.16.)
Expected return
Stock A
%
Stock B
%
Calculate the standard deviation of each stock. (Do...
You are given the following information: State of Economy Return on Stock A Return on...
You are given the following information:
State of
Economy
Return on
Stock A
Return on
Stock B
Bear
.119
−.062
Normal
.098
.165
Bull
.090
.250
Assume each state of the economy is equally likely to
happen.
Calculate the expected return of each of the following stocks.
(Do not round intermediate calculations and enter your
answers as a percent rounded to 2 decimal places, e.g.,
32.16.)
Expected return
Stock A
%
Stock B...
You are given the following information: State of Economy Probability of State of Economy Return...
You are given the following information:
State of
Economy
Probability of
State of Economy
Return on
Stock J
Return on
Stock K
Bear
.20
−.030
.024
Normal
.55
.128
.052
Bull
.25
.208
.082
Calculate the expected return for each of the stocks.
(Do not round intermediate calculations. Enter your answers
as a percent rounded to 2 decimal places (e.g.,
32.16).)
Expected return
Stock J
%
Stock K
%
Calculate the standard deviation for each of...
3) Consider information given in the following table. State of the Economy Probability Return of Stock...
3) Consider information given in the following table.
State of the Economy
Probability
Return of Stock A
Return of Stock B
Recession
0.1
2%
-5%
Normal
0.3
10%
8%
Boom
0.6
20%
25%
a) Calculate the expected return, variance of each stock, and
the covariance between the two stocks.
b) If the weights of both stocks are 55% in A and 45% in B,
respectively, what are the expected return and variance of the sum
of these two stocks?
Consider the following information (chart) Rate of Return State Of Economy Prob of State Stock A...
Consider the following information
(chart)
Rate of Return
State Of Economy
Prob of State
Stock A
Stock B
Stock C
Boom
.45
.08
.17
.24
Bust
.55
.11
-.05
-.08
What is the expected return on an equally weighed portfolio of
these three stocks?
What is the variance of a portfolio invested 20 percent each in
A and B and 60 percent in C?
State of Economy Probability of State of Economy Return of Stock A if State Occurs Return...
State of Economy
Probability of State of Economy
Return of Stock A if State Occurs
Return of Stock B if State Occurs
Recession
0.30
-0.20
0.10
Normal
?
0.30
0.20
Boom
0.15
0.40
0.30
What is the expected return for Stock A?
What is the standard deviation for Stock A?
Suppose you have $50,000 total. If you put $20,000 in Stock A
and the remainder in Stock B, what are the portfolio returns in
each state?
Suppose you have $50,000...
State of Economy Probability of State of Economy Return of Stock A if State Occurs Return...
State of Economy
Probability of State of Economy
Return of Stock A if State Occurs
Return of Stock B if State Occurs
Recession
0.20
-0.20
0.05
Normal
?
0.20
0.22
Boom
0.25
0.30
0.25
What is the expected return for Stock A?
What is the standard deviation for Stock A?
Suppose you have $50,000 total. If you put $10,000 in Stock A
and the remainder in Stock B, what are the portfolio returns in
each state?
Suppose you have $50,000...
Consider the following information: State of the Economy Probability of State of the Economy Return on...
Consider the following information:
State of the Economy
Probability of State of the Economy
Return on A %
Return on B %
Boom
0.40
10
4
Growth
0.20
-4
0
Normal
0.20
24
16
Recession
0.20
16
20
a) What is the
expected return for A? For
B?
b) What is the
standard deviation for A? For
B?
c) What is the
expected return on a portfolio of A and B that is 30% invested in A
and the remainder...
Based on the following information: State of Economy Probability of State of Economy Return on...
Based on the following information:
State of
Economy
Probability of
State of Economy
Return on
Stock J
Return on
Stock K
Bear
.30
−.015
.039
Normal
.65
.143
.067
Bull
.05
.223
.097
Calculate the expected return for each of the stocks.
(Do not round intermediate calculations and enter your
answers as a percent rounded to 2 decimal places, e.g.,
32.16.)
Expected return
Stock J
%
Stock K
%
Calculate the standard deviation for each of the stocks....
State of Economy Probability of State of Economy Return on Stock J Return on stock K...
State of Economy
Probability of State of Economy
Return on Stock J
Return on stock K
Bear
.23
-.013
.041
Normal
.58
.145
.069
Bull
.19
.225
.099
What is the Convariance and Correlation between
the returns of the 2 stocks?
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