Question
In: Finance
You are given the following information: State of Economy Probability of State of Economy Return...
| You are given the following information: |
| State of Economy |
Probability of State of Economy |
Return on Stock J |
Return on Stock K |
| Bear | .20 | −.030 | .024 |
| Normal | .55 | .128 | .052 |
| Bull | .25 | .208 | .082 |
|
Calculate the expected return for each of the stocks. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).) |
| Expected return | |
| Stock J | % |
| Stock K | % |
|
Calculate the standard deviation for each of the stocks. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).) |
| Standard deviation | |
| Stock J | % |
| Stock K | % |
|
What is the covariance between the returns of the two stocks? (Do not round intermediate calculations and round your answer to 6 decimal places (e.g., 32.161616).) |
| Covariance |
|
What is the correlation between the returns of the two stocks? (Do not round intermediate calculations and round your answer to 4 decimal places (e.g., 32.1616).) |
| Correlation |
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Consider the following information: State of the Economy Probability of State of the Economy Return on...
Consider the following information:
State of the Economy
Probability of State of the Economy
Return on A %
Return on B %
Boom
0.40
10
4
Growth
0.20
-4
0
Normal
0.20
24
16
Recession
0.20
16
20
a) What is the
expected return for A? For
B?
b) What is the
standard deviation for A? For
B?
c) What is the
expected return on a portfolio of A and B that is 30% invested in A
and the remainder...
Based on the following information: State of Economy Probability of State of Economy Return on...
Based on the following information:
State of
Economy
Probability of
State of Economy
Return on
Stock J
Return on
Stock K
Bear
.30
−.015
.039
Normal
.65
.143
.067
Bull
.05
.223
.097
Calculate the expected return for each of the stocks.
(Do not round intermediate calculations and enter your
answers as a percent rounded to 2 decimal places, e.g.,
32.16.)
Expected return
Stock J
%
Stock K
%
Calculate the standard deviation for each of the stocks....
You are given the following information: State of Economy Return on Stock A Return on...
You are given the following information:
State of
Economy
Return on
Stock A
Return on
Stock B
Bear
.119
−.062
Normal
.098
.165
Bull
.090
.250
Assume each state of the economy is equally likely to
happen.
Calculate the expected return of each of the following stocks.
(Do not round intermediate calculations and enter your
answers as a percent rounded to 2 decimal places, e.g.,
32.16.)
Expected return
Stock A
%
Stock B...
You are given the following information: State of Economy Return on Stock A Return on...
You are given the following information:
State of
Economy
Return on
Stock A
Return on
Stock B
Bear
.119
−.062
Normal
.098
.165
Bull
.090
.250
Assume each state of the economy is equally likely to
happen.
Calculate the expected return of each of the following stocks.
(Do not round intermediate calculations and enter your
answers as a percent rounded to 2 decimal places, e.g.,
32.16.)
Expected return
Stock A
%
Stock B...
Consider the following information: State of Economy Probability of State of Economy Rate of Return if...
Consider the following information:
State of
Economy
Probability of
State of Economy
Rate of Return
if State Occurs
Stock A
Stock B
Recession
.04
.097
.102
Normal
.72
.114
.133
Boom
.24
.156
.148
The market risk premium is 7.4 percent, and the risk-free rate is
3.1 percent. The beta of Stock A is ________ and the beta of Stock
B is ________.
a) 1.25; 1.41
b) 1.47; 1.76
c) 1.21; 1.76
d) 1.25; 1.89
e) 1.47; 1.41
3) Consider information given in the following table. State of the Economy Probability Return of Stock...
3) Consider information given in the following table.
State of the Economy
Probability
Return of Stock A
Return of Stock B
Recession
0.1
2%
-5%
Normal
0.3
10%
8%
Boom
0.6
20%
25%
a) Calculate the expected return, variance of each stock, and
the covariance between the two stocks.
b) If the weights of both stocks are 55% in A and 45% in B,
respectively, what are the expected return and variance of the sum
of these two stocks?
You are given the following information: State of Economy Return on Stock A Return on Stock...
You are given the following information:
State of
Economy
Return on
Stock A
Return on
Stock B
Bear
.109
−
.052
Normal
.108
.155
Bull
.080
.240
Assume each state of the economy is equally likely to happen.
Calculate the expected return of each stock. (Do not round
intermediate calculations. Enter your answers as a percent rounded
to 2 decimal places, e.g., 32.16.)
Expected return
Stock A
%
Stock B
%
Calculate the standard deviation of each stock. (Do...
You are given the following information: State of Economy Return on Stock A Return on Stock...
You are given the following information: State of Economy Return
on Stock A Return on Stock B Bear 0.103 -0.046 Normal 0.114 0.149
Bull 0.074 0.234 Assume each state of the economy is equally likely
to happen. a. Calculate the expected return of each stock. (Do not
round intermediate calculations and enter your answers as a percent
rounded to 2 decimal places, e.g., 32.16.) b. Calculate the
standard deviation of each stock. (Do not round intermediate
calculations and enter your...
Consider the following information: Rate of Return If State Occurs State of Probability of Economy...
Consider the following information:
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.75
.08
.17
.24
Bust
.25
.11
−
.05
−
.08
a.
What is the expected return on an equally weighted portfolio of
these three stocks? (Do not round intermediate calculations
and enter your answer as a percent rounded to 2 decimal places,
e.g., 32.16.)
b.
What is the variance of a portfolio...
Consider the following information: Rate of Return if State Occurs State of Economy Probability of...
Consider the following information:
Rate of Return if State Occurs
State of Economy
Probability of
State of Economy
Stock A
Stock B
Stock C
Boom
0.76
0.23
0.21
0.31
Bust
0.24
0.09
0.15
0.07
a. What is the expected return on an equally
weighted portfolio of these three stocks?
b. What is the variance of a portfolio invested
10 percent each in A and B and 80 percent in C?
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