Question
In: Finance
1. You have been given this probability distribution of the holding period return for KMP stock:...
1. You have been given this probability distribution of the holding period return for KMP stock:
State Probability Return
1 30% 20%
2 60% 12%
3 10% -5%
What are the expected return and standard deviation for KMP stock?
2. Portfolio A has a beta of 1.5. The market risk premium, RM-Rf, is 4.5%, and the risk-free rate is 4.5%. What is the expected return of the portfolio based on CAPM?
3. Suppose you pay $9,700 for a $10,000 par Treasury bill maturing in 3 months. What is the effective annual rate of return for this investment?
Solutions
Expert Solution
1)
expected return = 12.7%
Standard deviation = 6.9%
2) CAPM return = 11.25%
3) effective annual rate of return = 12.96%
jeff jeffy answered 1 year agoRelated Solutions
2. You have been given this probability distribution of the holding period return for KMP stock:...
2. You have been given this probability distribution of the
holding period return for KMP stock: State Probability Return 1 30%
20% 2 60% 12% 3 10% -5% What are the expected return and standard
deviation for KMP stock?
Holding Period Return
If you bought a security at $1,000 and after one year it is sold for $1,250
What is the holding period return of the investment?
The following data represent the probability distribution of the holding period returns for an investment in...
The following data represent the probability distribution of the
holding period returns for an investment in Lazy Rapids Kayaks
(LARK) stock. State of the Economy Scenario #(s) Probability, p(s)
HPR Boom 1 0.324 30.80% Normal growth 2 0.396 8.90% Recession 3
0.28 -18.00% a. What is the expected return on LARK? (Round your
answer to 2 decimal places.) Expected return % b. What is the
standard deviation of the returns on LARK? (Round your answer to 2
decimal places.) Standard...
The following data represent the probability distribution of the holding period returns for an investment in...
The following data represent the probability distribution of the
holding period returns for an investment in Lazy Rapids Kayaks
(LARK) stock.
State of the Economy
Scenario #(s)
Probability, p(s)
HPR
Boom
1
0.328
30.00%
Normal growth
2
0.402
9.40%
Recession
3
0.27
-18.30%
a. What is the expected return on LARK?
(Round your answer to 2 decimal places.)
Expected
return %
b. What is the standard deviation of the
returns on LARK? (Round your answer to 2 decimal
places.)
Standard deviation...
The holding period return on a stock was 25%. Its beginning price was $25 and its...
The holding period return on a stock was 25%. Its beginning
price was $25 and its cash dividend was $2.6. Its ending price must
have been _________.
Consider the following probability distribution for stocks A and B: State Probability Return on Stock A...
Consider the following probability distribution for stocks A and
B:
State
Probability
Return on Stock A
Return on Stock B
1
0.10
10
%
8
%
2
0.20
13
%
7
%
3
0.20
12
%
6
%
4
0.30
14
%
9
%
5
0.20
15
%
8
%
Let G be the global minimum variance portfolio. The weights of A
and B in G are ________ and ________, respectively.
Consider the following probability distribution for stocks A and B. Scenario Probability Return on Stock A...
Consider the following probability distribution for stocks A and
B.
Scenario
Probability
Return on Stock A
Return on Stock B
1
.35
12%
-15%
2
.4
4%
5%
3
.25
-4%
25%
1. What are the expected returns and standard deviations for
stocks A and B?
2. What is the correlation coefficient between the two
stocks?
3. Suppose the risk-free rate is 2%. What is the optimal risky
portfolio, its expected return and its standard deviation?
4. Suppose that stocks...
The market and Stock A have the following probability distributions: Probability Return on Market Return on...
The market and Stock A have the following probability
distributions:
Probability
Return on Market
Return on Stock A
0.15
15%
18%
0.3
12%
15%
0.55
10%
11%
a. Calculate the expected rates of return for the market and
Stock A.
b. Calculate the standard deviations for the market and Stock
A.
c. Calculate the coefficient of variation for the market and
Stock A.
Holding-period dollar gain and return) Suppose you purchased 15 shares of Diamond Company stock for $20.07...
Holding-period dollar gain and return) Suppose you purchased 15
shares of Diamond Company stock for $20.07 per share on May 1,
2016. On September 1 of the same year, you sold 13 shares of the
stock for $15.74. Calculate the holding-period dollar gain for
the shares you sold, assuming no dividend was distributed, and
the holding-period rate of return.
a. The holding-period dollar gain for the shares you sold is
$nothing. Enter a negative number if it is a loss. ...
Given the following price and dividend information: A. calculate the holding period return. (Round to 4...
Given the following price and dividend information:
A. calculate the holding period return. (Round to 4
decimals)
B. calculate the $1 investment equivalent. (Round to 4
decimals)
C.calculate the probability of losing money. (Round to 4
decimals)
Year
Price
Dividend
0
50.72
1
43.54
1.75
2
49.22
2.10
3
51.30
2.20
4
52.45
2.50
5
56.35
2.75
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