Question

In: Finance

Suppose your expectations regarding the stock price are asfollows:State of the MarketProbabilityEnding...

Suppose your expectations regarding the stock price are as follows:

State of the Market Probability Ending
Price		 HPR (including
dividends)
Boom 0.28 $ 140 53.5 %
Normal growth 0.23 110 20.0
Recession 0.49 80 −17.0


Use the equations E(r)=Σsp(s)r(s)E(r)=Σsp(s)r(s) and σ2=Σsp(s)[r(s)−E(r)]2σ2=Σsp(s) [r(s)−E(r)]2 to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.)


Solutions

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Suppose your expectations regarding the stock price are as follows: State of the Market Probability Ending...
Suppose your expectations regarding the stock price are as follows: State of the Market Probability Ending Price HPR (including dividends) Boom 0.23 $ 140 44.5 % Normal growth 0.29 110 11.5 Recession 0.48 80 −21.5 Use the equations E(r)=Σsp(s)r(s)E(r)=Σsp(s)r(s) and σ2=Σsp(s)[r(s)−E(r)]2σ2=Σsp(s) [r(s)−E(r)]2 to compute the mean and standard deviation of the HPR on stocks. Do not round intermediate calculations. Round your answers to 2 decimal places.) a .Mean% [___] b. Standard deviation% [____]
Suppose your expectations regarding the stock market are in the chart below. What is the standard...
Suppose your expectations regarding the stock market are in the chart below. What is the standard deviation of the HPRs on stocks? convert to percentages and round your answer to two decimal places State of the Economy Probability HPR Boom 10% 35% Normal Growth 40% 8% Recession 50% -20
Suppose your expectations regarding the stock market are as follows: State of the Economy Probability HPR...
Suppose your expectations regarding the stock market are as follows: State of the Economy Probability HPR Boom 0.4 32% Normal growth 0.3 20 Recession 0.3 -16 Use above equations to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Please show all working.
Suppose your expectations regarding the stock market are as follows: State of the Economy Probability HPR...
Suppose your expectations regarding the stock market are as follows: State of the Economy Probability HPR Boom 20% 15% Normal growth 50% 7% Recession 30% -10% Use above equations to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Mean % Standard deviation %
Suppose your expectations regarding the stock market are as follows: State of the Economy Probability HPR...
Suppose your expectations regarding the stock market are as follows: State of the Economy Probability HPR Boom 0.2 43% Normal growth 0.4 14 Recession 0.4 -17 Use above equations to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Suppose the current stock price is $120 and the stock price in a year can be...
Suppose the current stock price is $120 and the stock price in a year can be either $150 or $100. The risk-free rate is 2% per year, compounded annually. Compute the price of a European put option that expires in a year. The strike price is K=$130 (Hint: This is a put option case, not a call option. Be careful when you compute the cash-flow at expiration date. All other calculations should be the same as call option case.)
Suppose a stock currently trades at a price of 150. The stock price can go up...
Suppose a stock currently trades at a price of 150. The stock price can go up 33% or down 15%.The risk free rate is 4.5% 1. use a one period binomial model to calculate the price of a put option with exercise price of 150. 2. Suppose the put price is currently 14, show how to execute an arbitrage transaxtion that will earn more than the risk free rate . use 10,000 put options. 3. Suppose the put price is...
​Eagletron's current stock price is $10. Suppose that over the current​ year, the stock price will...
​Eagletron's current stock price is $10. Suppose that over the current​ year, the stock price will either increase by 95% or decrease by 45%. ​Also, the​ risk-free rate is 25 %25% ​(EAR). a. What is the value today of a​ one-year at-the-money European put option on Eagletron​ stock? b. What is the value today of a​ one-year European put option on Eagletron stock with a strike price of $ 19.50$19.50​? c. Suppose the put options in parts ​(a​) and ​(b​)...
1. Stock Prices, Expectations, and Policy Changes Explain, using the expectations model (and their role in...
1. Stock Prices, Expectations, and Policy Changes Explain, using the expectations model (and their role in determining asset prices) how the stock market is likely to react to each of the following scenarios: a) The Fed, as expected, raises the policy rate by 0.25 percentage points (25 basis points). b) The Fed unexpectedly raises the policy rate by 0.50 percentage points (50 basis points). c) At a meeting in which a rate hike was widely anticipated, the Fed surprises observers...
Suppose your margin account have $400 in cash. Price of the stock is $10 per share....
Suppose your margin account have $400 in cash. Price of the stock is $10 per share. Earlier bought a stock with 50% margin allowed by your broker, and use full margin. The 50% margin: 80 shares can be purchase and $800 is value of your account after the purchase. Now, suppose the broker issues margin call if margin % fall to 25%. The 25% margin: 160 shares can be purchase, $300 is value of your account after the purchase, and...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT