Question
In: Finance
Problem 6-06 Expected Returns: Discrete Distribution The market and Stock J have the following probability distributions:...
Problem 6-06
Expected Returns: Discrete Distribution
The market and Stock J have the following probability distributions:
| Probability | rM | rJ |
| 0.3 | 12% | 19% |
| 0.4 | 10 | 3 |
| 0.3 | 17 | 11 |
- Calculate the expected rate of return for the market. Round
your answer to two decimal places.
%
Calculate the expected rate of return for Stock J. Round your answer to two decimal places.
% - Calculate the standard deviation for the market. Do not round
intermediate calculations. Round your answer to two decimal
places.
%
Calculate the standard deviation for Stock J. Do not round intermediate calculations. Round your answer to two decimal places.
%
Solutions
Expert Solution
Solution :
a, The expected rate of return for the market = 12.70 %
The expected rate of return for Stock J = 10.20 %
b. The standard deviation for the market = 2.9343 %
= 2.93 % ( when rounded off to two decimal places )
The standard deviation for Stock J = 6.6453 %
= 6.65 % ( when rounded off to two decimal places )
Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.
jeff jeffy answered 1 year agoRelated Solutions
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Expected Returns: Discrete Distribution
The market and Stock J have the following probability
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Probability
rM
rJ
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21%
0.4
10
4
0.3
17
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a.Calculate the expected rate of return for the market. Round
your answer to two decimal places.
%
b. Calculate the expected rate of return for Stock J. Round your
answer to two decimal places.
%
c. Calculate the standard deviation for the market. Round your
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Expected Returns: Discrete Distribution The market and Stock J have the following probability distributions: Probability rM...
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0.4
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7
0.3
19
12
Calculate the expected rate of return for the market. Round
your answer to two decimal places.
%
Calculate the expected rate of return for Stock J. Round your
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%
Calculate the standard deviation for the market. Do not round
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