Question
In: Finance
Consider the following scenarios for Space Corp.’s likely equity returns per year: Scenario Probability &
- Consider the following scenarios for Space Corp.’s likely equity returns per year:
Scenario Probability Expected Returns
Really Bad 15% (5%)
Bad 20% 2.5%
Likely 30% 7.5%
Better 20% 12.5%
Really Good 15% 20%
What is the expected return for this security per year?
What is the standard deviation of expected returns?
What are the expected returns with a 90% confident interval, if this follows the normal distribution?
Solutions
Expert Solution
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jeff jeffy answered 1 year agoRelated Solutions
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Scenario Market Aggressive Stock A Defensive Stock D
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Boom 26 35 19 Required:
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c....
Consider the following two scenarios for the economy and the expected returns in each scenario for...
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Scenario
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Defensive
Stock D
Bust
–8
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40
22
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c....
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onsider the following two scenarios for the economy and the expected returns in each scenario for...
onsider the following two scenarios for the economy and the
expected returns in each scenario for the market portfolio, an
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Stock D
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–10
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Returns
0.3 15% 12% 0.4 9 5 0.3 18 20
a) Calculate the expected rates of return for the two
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Sudha Krishnaswami Lecture Notes
Page 1 of 3
Homework-6
a) Calculate the expected rates of return for the two
stocks.
b) Calculate the standard deviation of returns for the two
stocks.
c) Calculate the expected return and standard deviation on a
portfolio P made up of 75%
invested in McNally stock and the remaining...
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Consider the following probability distribution for stocks A and
B.
Scenario
Probability
Return on Stock A
Return on Stock B
1
.35
12%
-15%
2
.4
4%
5%
3
.25
-4%
25%
1. What are the expected returns and standard deviations for
stocks A and B?
2. What is the correlation coefficient between the two
stocks?
3. Suppose the risk-free rate is 2%. What is the optimal risky
portfolio, its expected return and its standard deviation?
4. Suppose that stocks...
The S&P 500 and Nohr Corp had the following returns over the past five years Year ...
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Year S&P
500
Nohr
.12
.23
.01
-.05
.18
.20
.09
.12
.10
.20
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b. What was the beta of Nohr relative to the S&P 500?
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Returns
Scenario
Probability
Auto
Gold
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Recession
1/3
-8
+20
.75(-8) + .25 (20) = -1.0%
Normal
1/3
+5
+3
.75(5) + .25 (3) = +4.5%
Boom
1/3
+18
-20
.75(18) + .25 (-20) = +8.5%
Expected Return
Auto
(-8+5+18)/3 = 5%
Gold
(+20+3-20)/3 = 1%
Portfolio
(-1+4.5+8.5)/3 = 4%
Variance
Auto
(169+0+169)/3 = 112.7 (std. 10.6%)
Gold
(361+4+441)/3 = 268.7 (std. 16.4%)
Portfolio
(25+.25 +20.25)/3 = 15.2 (std 3.9%)
Homework:
1) Show...
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