Question
In: Statistics and Probability
Consider the following information on the expected return for companies X and Y. Economy Probability X...
Consider the following information on the expected return for
companies X and Y.
| Economy | Probability | X | Y | ||||||
| Boom | 0.24 | 33 | % | 18 | % | ||||
| Neutral | 0.59 | 11 | % | 22 | % | ||||
| Poor | 0.17 | −35 | % | 4 | % | ||||
a. Calculate the expected value and the standard
deviation of returns for companies X and Y. (Round
intermediate calculations to at least 4 decimal places. Round your
final answers to 2 decimal places.)
b. Calculate the correlation coefficient if the
covariance between X and Y is 188. (Round your answer to 4
decimal places.)
Solutions
orchestra answered 1 year agoRelated Solutions
Consider the following information on Stocks X and Y: State of Economy Probability of State of...
Consider the following information on Stocks X and Y: State of
Economy Probability of State of Economy Rate of Return if State
Occurs Stock X Stock Y Recession 0.24 0.065 −0.29 Normal 0.69 0.365
0.21 Irrational exuberance 0.07 0.225 0.49 The market risk premium
is 11.9 per cent and the risk-free rate is 4.9 per cent. a.
Calculate the expected return, beta and standard deviation of stock
X. (Do not round intermediate calculations. Enter the expected
returns and standard deviations...
Consider the following information: State of the Economy Probability of State of the Economy Return on...
Consider the following information:
State of the Economy
Probability of State of the Economy
Return on A %
Return on B %
Boom
0.40
10
4
Growth
0.20
-4
0
Normal
0.20
24
16
Recession
0.20
16
20
a) What is the
expected return for A? For
B?
b) What is the
standard deviation for A? For
B?
c) What is the
expected return on a portfolio of A and B that is 30% invested in A
and the remainder...
Consider the following information: State of Economy Probability of State of Economy Rate of Return if...
Consider the following information:
State of
Economy
Probability of
State of Economy
Rate of Return
if State Occurs
Stock A
Stock B
Recession
.04
.097
.102
Normal
.72
.114
.133
Boom
.24
.156
.148
The market risk premium is 7.4 percent, and the risk-free rate is
3.1 percent. The beta of Stock A is ________ and the beta of Stock
B is ________.
a) 1.25; 1.41
b) 1.47; 1.76
c) 1.21; 1.76
d) 1.25; 1.89
e) 1.47; 1.41
Use the following information to find expected return for this portfolio. State of Economy Probability of...
Use the following information to find expected
return for this portfolio.
State of Economy
Probability of State
Returns if State Occurs
Stock A
Stock B
Stock C
Stock D
Boom
40%
-15%
16%
25%
20%
Normal
30%
5%
10%
-3%
2%
Recession
30%
28%
6%
-10%
-5%
Portfolio Weights
10%
20%
30%
40%
ANSWERS:
11.20%
3.90%
8.19%
7.08%
7.30%
Use the following information to find expected return for this portfolio. State of Economy Probability of...
Use the following information to find expected
return for this portfolio.
State of Economy
Probability of State
Returns if State Occurs
Stock A
Stock B
Stock C
Stock D
Boom
40%
-15%
16%
25%
20%
Normal
30%
5%
10%
-3%
2%
Recession
30%
28%
6%
-10%
-5%
Portfolio Weights
10%
20%
30%
40%
ANSWERS:
11.20%
3.90%
8.19%
7.08%
7.30%
Consider the following information: Rate of Return If State Occurs State of Probability of Economy...
Consider the following information:
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.75
.08
.17
.24
Bust
.25
.11
−
.05
−
.08
a.
What is the expected return on an equally weighted portfolio of
these three stocks? (Do not round intermediate calculations
and enter your answer as a percent rounded to 2 decimal places,
e.g., 32.16.)
b.
What is the variance of a portfolio...
Consider the following information: Rate of Return if State Occurs State of Economy Probability of...
Consider the following information:
Rate of Return if State Occurs
State of Economy
Probability of
State of Economy
Stock A
Stock B
Stock C
Boom
0.76
0.23
0.21
0.31
Bust
0.24
0.09
0.15
0.07
a. What is the expected return on an equally
weighted portfolio of these three stocks?
b. What is the variance of a portfolio invested
10 percent each in A and B and 80 percent in C?
Consider the following information: Rate of Return if State Occurs State of Economy Probability of...
Consider the following
information:
Rate of Return if State Occurs
State of Economy
Probability
of
State of Economy
Stock A
Stock B
Stock C
Boom
0.62
0.07
0.27
0.17
Bust
0.38
0.17
0.15
0.01
Requirement
1:
What is the expected return on an equally weighted portfolio of
these three stocks? (Do not round your intermediate
calculations.)
14.72% 17.22% 26.75% 29.52% 8.99%
Requirement
2:
What is the variance of a portfolio invested 30 percent each in
A and...
Consider the following information: Rate of Return If State Occurs State of Probability of Economy...
Consider the following information:
Rate of Return If State Occurs
State of Probability of
Economy State of Economy Stock A Stock B
Recession .22 .10 ? .17
Normal .52 .13 .12
Boom .26 .18 .29
Calculate the expected return for each stock. (Do not round
intermediate calculations. Enter your answers as a percent rounded
to 2 decimal places, e.g., 32.16.)
Expected return
Stock A %
Stock B %
Calculate the standard deviation for each stock. (Do...
Consider the following information: Rate of Return If State Occurs State of Probability of Economy...
Consider the following information:
Rate of Return If State Occurs
State of Probability of
Economy State of Economy Stock A Stock B Stock C
Boom .65 .11 .19 .37
Bust .35 .12 .06 ?.05
a.
What is the expected return on an equally weighted portfolio
of these three stocks? (Do not round intermediate calculations.
Enter your answer as a percent rounded to 2 decimal places, e.g.,
32.16.)
Expected return %
b.
What is the variance of a portfolio...
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