Question

7.4 Chapter 7 HW - Problem Mastery

1) Tommy wishes to determine the return on two stocks she owned in 2019.
At the beginning of the year, stock X traded for $80per share. During the year, X paid dividends of $8
At the end of the year, Xstock was worth $62
Calculate the annual rate of return, r, for X
(Enter the answer in % format without % sign -> 20.51 and not 20.51% or 0.2051)

3) Calculate the standard deviation of this scenario
Outcome 1: Recession. Probability = 40%. Return = 7.38%.
Outcome 1: Recovery. Probability = 60%. Return = 17.27%.
Answer in % terms w/o % sign and to 4 decimal places (1.2345)

11) Your stock has a β = 1.73, the expected return on the stock market is 17.3%, and the yield on T-bills is 4%.
What is the expected return on your stock?

Answer 1