Question

In: Finance

In the next year, there is a 40% chance of a bear market, and a 60%...

In the next year, there is a 40% chance of a bear market, and a 60% change of a bull market. Over the next year:

Debt will realize a 0% return in a bear market, and a 6% return in a bull market.
Equity will realize a -10% return in a bear market, and a 20% return in a bull market

What is the correlation of debt and equity? (decimal number, 3 decimal places)

Solutions

Expert Solution

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

In the next year, there is a 40% chance of a bear market, and a 60%...
In the next year, there is a 40% chance of a bear market, and a 60% change of a bull market. Over the next year: Debt will realize a 0% return in a bear market, and a 6% return in a bull market. Equity will realize a -10% return in a bear market, and a 20% return in a bull market. What is the covariance of debt and equity? (decimal number, 4 decimal places)
In the following year, there is a 10% chance of a bear market, a 20% chance...
In the following year, there is a 10% chance of a bear market, a 20% chance of a bull market, and a 70% chance of a neutral market. Debt will return -2%, 5%, and 5% in the bear, bull and neutral market, respectively. Equity will return -15%, 15%, and 8% in the bear, bull and neutral market , respectively . What is the expected return of debt in %?  (round to 1 decimal place) What is the volatility of equity in...
If a stock has a 30% chance of losing 18%, a 40% chance of losing only...
If a stock has a 30% chance of losing 18%, a 40% chance of losing only 3%, and a 30% chance of making 15%, what is the expected return of this stock? -2.10% 7.25% 11.10% -7.25%
In a SINGLE day I have a 60% chance of making 0 sales, 30% chance of...
In a SINGLE day I have a 60% chance of making 0 sales, 30% chance of making 1 sale and 10% chance of making 2 sales. (a) Write out the PDF for the number of sales made in TWO days
The economy has a 10 percent chance of booming, 60 percent chance of being normal, and...
The economy has a 10 percent chance of booming, 60 percent chance of being normal, and 30 percent chance of going into a recession. A stock is expected to return 16 percent in a boom, 11 percent in a normal, and lose 8 percent in a recession. The return on real estate is 10% in a normal and a boom, and -10% in a recession. What is the correlation between the return of the stock and the return of real...
A new business opportunity has a 70% chance of being worth $500,000 next year and a...
A new business opportunity has a 70% chance of being worth $500,000 next year and a 30% chance of being worth $100,000. The appropriate expected rate of return is 10%. Assume that the new opportunity will be financed with a $150,000 bank loan. What is the maximum amount of his own money that an owner should be willing to invest in this business? A) $215,000 B) $195,455 C) $345,455 D) $230,000
Rosa, who has a 10% chance of getting sick in the next year. If she gets...
Rosa, who has a 10% chance of getting sick in the next year. If she gets sick, her medical bills will amount to $1900. She has a wealth of $10,000. Suppose she has the utility function ?(?) = √ ?, where x is her net wealth at the end of the year. 6. Calculate Rosa’s risk premium. (a) $5 (b) $7 (c) $9 (d) $11 (e) None of the above 7. What is the most that Rosa is willing to...
Dystopia county has three bridges. In the next year, the Elder bridge has a 13% chance...
Dystopia county has three bridges. In the next year, the Elder bridge has a 13% chance of collapse, the Younger bridge has a 7% chance of collapse, and the Ancient bridge has a 21% chance of collapse. What is the probability that exactly one of these bridges will collapse in the next year? (Round your final answer to four decimal places. Do not round intermediate calculations.)
ABC Inc.'s stock has a 30% chance of producing a 10% return, a 40% chance of...
ABC Inc.'s stock has a 30% chance of producing a 10% return, a 40% chance of producing a 0% return, and a 30% chance of producing a -5% return. What is the firm's expected rate of return?
Water Cost (in$) Number of house (fi) 20 -<40 16 40 -< 60 9 60 -<...
Water Cost (in$) Number of house (fi) 20 -<40 16 40 -< 60 9 60 -< 80 12 80 - < 100 10 Total 47 1.Calculate the mean cost of water. 2.Calculate the variance. 3.Calculate the mode
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT