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The stock of XYZ sells for $75 a share. Its likely dividend payout and end-of-year price...

The stock of XYZ sells for $75 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows:

Dividend Stock Price
Boom $2.50 $83
Normal economy 1.30 77
Recession 0.75 65

a. Calculate the expected holding-period return and standard deviation of the holding-period return. All three scenarios are equally likely. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b. Calculate the expected return and standard deviation of a portfolio invested half in XYZ stock and half in Treasury bills. The return on bills is 5%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

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jeff jeffy answered 1 year ago
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