Question
In: Finance
Intro We know the following expected returns for stocks A and B, given different states of...
Intro
We know the following expected returns for stocks A and B, given different states of the economy:
| State (s) | Probability | E(rA,s) | E(rB,s) |
| Recession | 0.2 | -0.03 | 0.02 |
| Normal | 0.5 | 0.12 | 0.05 |
| Expansion | 0.3 | 0.2 | 0.09 |
The expected return on the market portfolio is 0.09 and the risk-free rate is 0.02.
Attempt 3/10 for 8 pts.
Part 1
What is the standard deviation of returns for stock A?
Solutions
Expert Solution
STANDARD DEVIATION IS EXPRESSED IN DECIMAL TERMS AND
ALSO IN % TERMS. THANK YOU
jeff jeffy answered 1 year agoRelated Solutions
We know the following expected returns for stocks A and B, given different states of the...
We know the following
expected returns for stocks A and B, given different states of the
economy:
State (s)
Probability
E(rA,s)
E(rB,s)
Recession
0.3
-0.01
0.04
Normal
0.5
0.14
0.07
Expansion
0.2
0.22
0.11
Note:
If you can, it is much faster to solve these problems in a
spreadsheet. However, the answer cannot be had simply by
using the built-in AVERAGE() or STDEV() functions. If you are
somewhat familiar with Excel, you might look into the SUMPRODUCT()
function which is...
Stocks A and B have the following returns in each of the states given below. Good...
Stocks A and B have the following returns in each of the states
given below.
Good
Bad
Ugly
Stock A return
25%
10%
-25%
Stock B return
1%
-5%
35%
The probability of the good state is 0.5, the probability of the
bad state is 0.3 and the probability of the ugly state is 0.2. What
is the covariance between the returns of A and B? (Hint: The
expected return of A is 10.5% and the expected return of B...
If we have a portfolio of multiple stocks with given expected returns and variances, do we...
If we have a portfolio of multiple stocks with given expected
returns and variances, do we prefer to hold stocks with higher or
lower correlations? Explain your answer for full credit.
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(8%)
(21%)
0.2
6
0
0.4
10
24
0.2
24
30
0.1
36
49
Calculate the expected rate of return, rB, for Stock
B (rA = 12.80%.) Do not round intermediate calculations.
Round your answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 18.87%.) Do not round
intermediate calculations. Round your...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.2
(14%)
(35%)
0.2
4
0
0.3
12
20
0.2
18
29
0.1
30
42
Calculate the expected rate of return, rB, for Stock
B (rA = 8.20%.) Do not round intermediate calculations.
Round your answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 25.07%.) Do not round
intermediate calculations. Round your...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.2
(11%)
(27%)
0.2
3
0
0.3
11
21
0.2
22
27
0.1
40
41
A.Calculate the expected rate of return, rB, for
Stock B (rA = 10.10%.) Do not round intermediate
calculations. Round your answer to two decimal places.
%
B.Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 22.00%.) Do not round
intermediate calculations. Round your...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(14%)
(29%)
0.2
3
0
0.4
13
23
0.2
24
27
0.1
35
37
Calculate the expected rate of return, rB, for Stock
B (rA = 12.70%.) Do not round intermediate calculations.
Round your answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 18.47%.) Do not round
intermediate calculations. Round your...
Expected returns Stocks A and B have the following probability distributions of expected future returns: Probability...
Expected returns
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.2
-10%
-39%
0.2
6
0
0.3
11
21
0.2
20
27
0.1
36
44
Calculate the expected rate of return, rB, for Stock
B (rA = 10.10%.) Do not round intermediate calculations.
Round your answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 26.59%.) Do not round
intermediate calculations. Round your...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(10%)
(35%)
0.2
3
0
0.3
11
19
0.3
19
27
0.1
32
47
Calculate the expected rate of return, rB, for Stock
B (rA = 11.80%.) Do not round intermediate calculations.
Round your answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 21.10%.) Do not round
intermediate calculations. Round your...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(7%)
(26%)
0.2
5
0
0.3
10
24
0.3
22
28
0.1
33
40
Calculate the expected rate of return, rB, for Stock
B (rA = 13.20%.) Do not round intermediate calculations.
Round your answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 18.62%.) Do not round
intermediate calculations. Round your...
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