Question
In: Finance
Consider the following information on Stocks I and II: RATE OF RETURN IF STATE OCCURS...
| Consider the following information on Stocks I and II: |
| RATE OF RETURN IF STATE OCCURS | |||
| STATE OF ECONOMY |
PROBABILITY OF STATE OF ECONOMY |
STOCK I | STOCK II |
| Recession | 0.13 | 0.15 | 0.05 |
| Normal | 0.14 | 0.25 | 0.25 |
| Irrational exuberance | 0.73 | 0.29 | 0.43 |
| The market risk premium is 11 percent, and the risk-free rate is 6.05 percent. |
|
For standard deviations: (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16)) |
| For betas: (Round your answers to 2 decimal places. (e.g., 32.16)) |
|
The standard deviation on Stock I's expected return is percent, and the Stock I beta is . The standard deviation on Stock II's expected return is percent, and the Stock II beta is . Therefore, based on the stocks' systematic risk/beta, Stock (Click to select)III is "riskier". |
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Consider the following information about Stocks I and II: Rate of Return if State Occurs State...
Consider the following information about Stocks I and II:
Rate of Return if State Occurs
State of
Probability of
Economy
State of Economy
Stock I
Stock II
Recession
.26
.05
−
.31
Normal
.50
.22
.11
Irrational exuberance
.24
.05
.51
The market risk premium is 5 percent, and the risk-free rate is
3 percent.
The standard deviation on Stock I's expected return
is______percent, and the Stock I beta is_____.The standard
deviation on Stock II's expected return is______percent, and the...
Consider the following information about Stocks I and II: Rate of Return If State Occurs State...
Consider the following information about Stocks I and II: Rate
of Return If State Occurs State of Probability of Economy State of
Economy Stock I Stock II Recession .30 .04 ?.19 Normal .50 .16 .06
Irrational exuberance .20 .05 .39 The market risk premium is 8
percent, and the risk-free rate is 5 percent. (Do not round
intermediate calculations. Round your answers to 2 decimal places,
e.g., 32.16. Enter your return answers as a percent. ) The standard
deviation on...
Consider the following information about Stocks I and II: Rate of Return If State Occurs State...
Consider the following information about Stocks I and II: Rate
of Return If State Occurs State of Probability of Economy State of
Economy Stock I Stock II Recession .30 .08 −.27 Normal .45 .19 .14
Irrational exuberance .25 .13 .47 The market risk premium is 8
percent, and the risk-free rate is 6 percent. (Do not round
intermediate calculations. Enter your standard deviation answers as
a percent rounded to 2 decimal places, e.g., 32.16. Round your beta
answers to 2...
Consider the following information on Stocks I and II: Rate of Return If State Occurs Probability...
Consider the following information on Stocks I and II:
Rate of Return If State Occurs
Probability of
State of Economy
State of Economy
Stock I
Stock II
Recession
.35
.03
-.23
Normal
.30
.39
.14
Irrational exuberance
.35
.33
.49
The market risk premium is 10 percent, and the risk-free rate
is 4.5 percent.
1-a.
What is the beta of each stock? (Do not round
intermediate calculations. Round your answers to 2 decimal
places.)
Beta
Stock I
Stock II...
Consider the following information on Stocks I and II: State of Probability of Rate of Return...
Consider the following information on Stocks I and II:
State of Probability of Rate of Return if State Occurs
Economy State of Economy Stock I Stock II
Recession .21 .015 ? .31
Normal .56 .325 .23
Irrational exuberance .23 .185 .41
The market risk premium is 11.1 percent, and the risk-free rate
is 4.1 percent.
Calculate the beta and standard deviation of Stock I. (Do not round
intermediate calculations. Enter the standard deviation as a
percent and round both answers...
Consider the following information on Stocks I and II: State of Probability of Rate of Return...
Consider the following information on Stocks I and II:
State of
Probability of
Rate of Return if State Occurs
Economy
State of Economy
Stock I
Stock II
Recession
.27
.030
?
.22
Normal
.62
.330
.14
Irrational exuberance
.11
.190
.42
The market risk premium is 11.2 percent, and the risk-free rate
is 4.2 percent.
Calculate the beta and standard deviation of Stock I. (Do
not round intermediate calculations. Enter the standard deviation
as a percent and round both answers...
Consider the following information on Stocks I and II: State of Probability of Rate of Return...
Consider the following information on Stocks I and II:
State of
Probability of
Rate of Return if State Occurs
Economy
State of Economy
Stock I
Stock II
Recession
.22
.045
−
.37
Normal
.62
.355
.29
Irrational exuberance
.16
.215
.47
The market risk premium is 11.7 percent, and the risk-free rate
is 4.7 percent.
Calculate the beta and standard deviation of Stock I. (Do
not round intermediate calculations. Enter the standard deviation
as a percent and round both answers...
Consider the following information on three stocks: Rate of Return If State Occurs State of Economy...
Consider the following information on three stocks:
Rate of Return If State Occurs
State of Economy
Probability of State
of Economy
Stock A
Stock B
Stock C
Boom
.25
.35
.40
.52
Normal
.50
.17
.15
.13
Bust
.25
.01
?.32
?.40
a-1 If your portfolio is invested 35 percent each
in A and B and 30 percent in C, what is the portfolio expected
return? (Do not round intermediate calculations. Enter your
answer as a percent rounded to 2...
Consider the following information about three stocks: Rate of Return If State Occurs State of...
Consider the following
information about three stocks:
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.20
.38
.50
.50
Normal
.55
.16
.14
.12
Bust
.25
.00
?.30
?.50
a-1
If your portfolio is invested 30 percent each in A and B and 40
percent in C, what is the portfolio expected return? (Do
not round intermediate calculations. Enter your answer as a percent
rounded...
Consider the following information about three stocks: Rate of Return If State Occurs State of...
Consider the following information about three stocks:
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.26
.32
.44
.56
Normal
.50
.13
.11
.09
Bust
.24
.04
−.25
−.45
a-1
If your portfolio is invested 40 percent each in A and B and 20
percent in C, what is the portfolio expected return? (Do
not round intermediate calculations. Enter your answer as a percent
rounded...
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