Question
In: Finance
The stock of Business Adventures sells for $60 a share. Its likely dividend payout and end-of-year...
|
The stock of Business Adventures sells for $60 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 | $2.00 | $73 |
| Normal economy | 1.50 | 63 |
| Recession | 0.70 | 59 |
|
Calculate the expected holding-period return. All three scenarios are equally likely. (Do not round intermediate calculations. Round your answer to 4 decimal places) |
Expected return?
Use 0.01 Instead of 1%
Solutions
Expert Solution
Boom holding period return=(73+2)/60-1=25%
Normal holding period return=(63+1.50)/60-1=7.5%
Recession holding period return=(59+0.70)/60-1=-0.5%
Calculate the expected holding-period return=(1/3)*25%+(1/3)*7.5%+(1/3)*(-0.5%)=0.1067 or 10.67%
jeff jeffy answered 2 years agoRelated Solutions
The stock of Business Adventures sells for $60 a share. Its likely dividend payout and end-of-year...
The stock of Business Adventures sells for $60 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
$2.00
$73
Normal economy
1.50
63
Recession
.70
59
Calculate the standard deviation of the holding-period return.
All three scenarios are equally likely.
(Do not round intermediate calculations. Round your
answer to 4 decimal places)
Standard deviation?
The stock of Business Adventures sells for $60 a share. Its likely dividend payout and end-of-year...
The stock of Business Adventures sells for $60 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 $2.00 $70 Normal economy 1.80 63 Recession 0.90 54 a.
Calculate the expected holding-period return and standard deviation
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The stock of Business Adventures sells for $60 a share. Its likely dividend payout and end-of-year...
The stock of Business Adventures sells for $60 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
$2.00
$73
Normal economy
1.50
63
Recession
0.70
59
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...
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Dividend
Stock Price
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Normal economy
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44
Recession
.70
34
a. Calculate the expected holding-period return
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scenarios are equally likely. (Do not round intermediate
calculations. Round your answers to 2 decimal places.)
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Standard...
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Dividend
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Boom
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Normal economy
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Recession
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likely dividend payout and end-of-year price depend on the state of
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Dividend
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Normal economy
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Recession
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26
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Calculate the expected holding-period return and standard
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