Question

In: Finance

Summerville Inc. is considering an investment in one of two common stocks. Given the information in...

Summerville Inc. is considering an investment in one of two common stocks. Given the information in the popup​ window: ​, which investment is​ better, based on the risk​ (as measured by the standard​ deviation) and return of​ each? a. The expected rate of return for Stock A is nothing ​%. ​ (Round to two decimal​ places)

COMMON STOCK A COMMON STOCK B PROBABILITY RETURN PROBABILITY RETURN 0.20 12% 0.20 -6% 0.60 15% 0.30 7% 0.20 18% 0.30 15% 0.20 20%

Solutions

Expert Solution

Calculations-

Please upvote if the answer is helpful.In case of doubt,do comment.Thanks.


Related Solutions

A. Fair, Inc. is considering an investment in one of two common stocks. Given the information...
A. Fair, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on risk (as measured by the standard deviation) and return? Stock A Stock B Probability Return Probability Return 0.3 12% 0.2 15% 0.4 16% 0.3 6% 0.3 18% 0.3 13% 0.2 21%
Syntex, Inc. is considering an investment in one of two common stocks. Given the information that​...
Syntex, Inc. is considering an investment in one of two common stocks. Given the information that​ follows, which investment is​ better, based on the risk​ (as measured by the standard​ deviation) and​ return? Common Stock A              Common Stock B              Probability Return Probability Return 0.20 12​% 0.15 −7% 0.60 14​% 0.35 5​% 0.20 18​% 0.35 13​% 0.15 21​%  A. Given the information in the​ table, the expected rate of return for stock A is _____ ​(Round to two decimal​ places.) The...
QUESTION A. Fair, Inc. is considering an investment in one of two common stocks. Given the...
QUESTION A. Fair, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on risk (as measured by the standard deviation) and return? Stock A Stock B Probability Return Probability Return .30 12% .20 15% .40 16% .30 6% .30 18% .30 13% .20 21% B. ‘Understanding the relationship between risk and return and how it’s affected by time is probably one of the most important aspects of investment’...
1.Syntex Increases. Is considering an investment in one of two common stocks. Given the information that...
1.Syntex Increases. Is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on risk (as measure by the standard deviation ) and return Common Stock A Common Stock B Probability Return Probability Return 0.30 11% 0.20 -5% 0.40 15% 0.30 6% 0.30 19% 0.30 14% 0.20 22%
An investment company is considering investing into one of the following stocks with the risk and...
An investment company is considering investing into one of the following stocks with the risk and return characteristics given below: Risk free rate = 5.1%     Average market rate = 7% Stock Exp. Rate Beta A 18% 1,5 B 16% 1,3 C 18% 1,85 D 6% 0,9 E 5.5% 0,7 F 5.8% 0.7 Required: 1. Determine which stocks are overvalued and which are undervalued in comparison with market fair determination of required returns. Provide your reason why you think they are...
You are considering a stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.),...
You are considering a stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both of which operate in the same industry and have identical operating income of $15.5 million. NoEquity, Inc., finances its $70 million in assets with $69 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc., finances its $70 million in assets with no debt and $70 million in equity. Both firms pay a tax rate...
You are considering a stock investment in one of two firms (NoEquity, Inc. and NoDebt, Inc.),...
You are considering a stock investment in one of two firms (NoEquity, Inc. and NoDebt, Inc.), both of which operate in the same industry and have identical operating income of $9.5 million. NoEquity, Inc. finances its $20 million in assets with $19 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc. finances its $20 million in assets with no debt and $20 million in equity. Both firms pay a tax rate...
Diamond and Turf Inc. is considering an investment in one of two machines. The sewing machine...
Diamond and Turf Inc. is considering an investment in one of two machines. The sewing machine will increase productivity from sewing 180 baseballs per hour to sewing 324 per hour. The contribution margin per unit is $0.5 per baseball. Assume that any increased production of baseballs can be sold. The second machine is an automatic packing machine for the golf ball line. The packing machine will reduce packing labor cost. The labor cost saved is equivalent to $21 per hour....
Diamond & Turf Inc. is considering an investment in one of two machines. The sewing machine...
Diamond & Turf Inc. is considering an investment in one of two machines. The sewing machine will increase productivity from sewing 150 baseballs per hour to sewing 290 per hour. The contribution margin per unit is $0.32 per baseball. Assume that any increased production of baseballs can be sold. The second machine is an automatic packing machine for the golf ball line. The packing machine will reduce packing labor cost. The labor cost saved is equivalent to $21 per hour....
Expected rate of return and risk. Syntex, inc is considering an investment in one of two...
Expected rate of return and risk. Syntex, inc is considering an investment in one of two common stocks. Given the information that follows, which invest is better, based on the risk (as measured by the standard deviation) and return? Common stock A Common stock B Probability Return Probability Return 0.36 13% 0.10 -6% 0.30 17% 0.40 8% 0.35 21% 0.40 16% 0.10 21%
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT