Question
In: Finance
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. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Standard deviation | |
| Stock J | % |
| Stock K | % |
|
What is the covariance between the returns of the two stocks? (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? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) |
| Correlation |
Solutions
jeff jeffy answered 7 months agoRelated Solutions
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...
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...
Consider the following information: State of Economy Probability of State of Economy Rate of Return if...
Consider the following information:
State of
Economy
Probability of
State of Economy
Rate of Return
if State Occurs
Stock A
Stock B
Recession
.04
.097
.102
Normal
.72
.114
.133
Boom
.24
.156
.148
The market risk premium is 7.4 percent, and the risk-free rate is
3.1 percent. The beta of Stock A is ________ and the beta of Stock
B is ________.
a) 1.25; 1.41
b) 1.47; 1.76
c) 1.21; 1.76
d) 1.25; 1.89
e) 1.47; 1.41
Answer the following question based on the information below: State of Economy Probability Stock A’s return...
Answer the following question based on the information
below:
State of Economy
Probability
Stock A’s return
Stock B’s return
Boom
.4
15%
- 30%
Recession
.6
5%
40%
Which of the following statements is true?
a) Stock A has higher expected return than stock B.
b) The actual return of stock A will always be greater than that
of stock B.
c) Stock A has higher total risk than stock B.
d) Stocks A and B are positively correlated.
Calculate the expected return based on the information in the table below State of economy Probability...
Calculate the expected return based on the information in the
table below
State of economy
Probability of state of economy
Rate of return if state occurs
Recession
.30
-.07
Normal
.60
.13
Boom
.10
.23
Consider the following information: Rate of Return If State Occurs State of Probability of Economy...
Consider the following information:
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.75
.08
.17
.24
Bust
.25
.11
−
.05
−
.08
a.
What is the expected return on an equally weighted portfolio of
these three stocks? (Do not round intermediate calculations
and enter your answer as a percent rounded to 2 decimal places,
e.g., 32.16.)
b.
What is the variance of a portfolio...
Consider the following information: Rate of Return if State Occurs State of Economy Probability of...
Consider the following information:
Rate of Return if State Occurs
State of Economy
Probability of
State of Economy
Stock A
Stock B
Stock C
Boom
0.76
0.23
0.21
0.31
Bust
0.24
0.09
0.15
0.07
a. What is the expected return on an equally
weighted portfolio of these three stocks?
b. What is the variance of a portfolio invested
10 percent each in A and B and 80 percent in C?
Consider the following information: Rate of Return if State Occurs State of Economy Probability of...
Consider the following
information:
Rate of Return if State Occurs
State of Economy
Probability
of
State of Economy
Stock A
Stock B
Stock C
Boom
0.62
0.07
0.27
0.17
Bust
0.38
0.17
0.15
0.01
Requirement
1:
What is the expected return on an equally weighted portfolio of
these three stocks? (Do not round your intermediate
calculations.)
14.72% 17.22% 26.75% 29.52% 8.99%
Requirement
2:
What is the variance of a portfolio invested 30 percent each in
A and...
Consider the following information: Rate of Return If State Occurs State of Probability of Economy...
Consider the following information:
Rate of Return If State Occurs
State of Probability of
Economy State of Economy Stock A Stock B
Recession .22 .10 ? .17
Normal .52 .13 .12
Boom .26 .18 .29
Calculate the expected return for 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 for each stock. (Do...
Consider the following information: Rate of Return If State Occurs State of Probability of Economy...
Consider the following information:
Rate of Return If State Occurs
State of Probability of
Economy State of Economy Stock A Stock B Stock C
Boom .65 .11 .19 .37
Bust .35 .12 .06 ?.05
a.
What is the expected return on an equally weighted portfolio
of these three stocks? (Do not round intermediate calculations.
Enter your answer as a percent rounded to 2 decimal places, e.g.,
32.16.)
Expected return %
b.
What is the variance of a portfolio...
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