Question

Scenario Probability Rate of Return 1 0.27 −4 % 2 0.39 7 % 3 0.34 27...

Scenario Probability Rate of Return
1 0.27 −4 %
2 0.39 7 %
3 0.34 27 %

a. Calculate the expected rate of return. (Round intermediate calculations to at least 4 decimal places. Round your answer to 2 decimal places.)




b. Calculate the variance and the standard deviation of this probability distribution. (Use the percentage values for your calculations (for example 10% not 0.10). Round intermediate calculations to at least 4 decimal places. Enter your answer as a percentage rounded to 2 decimal places.)

  Variance %2  
  Standard deviation %   
Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

a)

Scenario Probability, P Rate of return, r (%) P*r
1 0.27 -4 -1.0800
2 0.39 7 2.7300
3 0.34 27 9.1800
10.8300

Expected rate of return is given by

b)

Scenario Probability, P Rate of return, r (%) P*r
1 0.27 -4 -1.0800 250.5889 67.6590
2 0.39 7 2.7300 23.3289 9.0983
3 0.34 27 9.1800 230.1289 78.2438
10.8300 155.0011

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider the following table:     Stock Fund Bond Fund Scenario Probability Rate of Return Rate of...
Consider the following table:     Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return   Severe recession 0.05        −44%        −13%            Mild recession 0.25        −16%        11%            Normal growth 0.40        10%        4%            Boom 0.30        30%        3%              b. Calculate the values of expected return and variance for the stock fund. (Do not round intermediate calculations. Enter...
An analyst has developed the following probability distribution for the rate of return for a common...
An analyst has developed the following probability distribution for the rate of return for a common stock. Scenario Probability Rate of Return 1 0.30 -5% 2 0.45 0% 3 0.25 10% For these questions use the percentage values for your calculations (for example 10% not 0.10). Enter your response as a percentage rounded to 2 decimal places. a. Calculate the expected rate of return. Expected Rate of Return =  % b. Calculate the variance of the return. Variance =  %2 c. Calculate...
Consider the following table:     Stock Fund Bond Fund Scenario Probability Rate of Return Rate of...
Consider the following table:     Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession 0.10 −37% −10% Mild recession 0.20 −17% 16% Normal growth 0.40 22% 9% Boom 0.30 27% −6% a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 2 decimal places.)   Mean return ??? % Variance ??? %-Squared b. Calculate the value of...
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return...
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession 0.10 −32% −17% Mild recession 0.15 −22% 15% Normal growth 0.35 14% 6% Boom 0.40 35% 4% a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 4 decimal places.) Mean return % Variance b. Calculate the value of the covariance between the...
Problem 6-7 Consider the following table:      Stock Fund Bond Fund Scenario Probability Rate of Return...
Problem 6-7 Consider the following table:      Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return   Severe recession 0.10        −34%        −9%            Mild recession 0.20        −20%        5%            Normal growth 0.30        21%        9%            Boom 0.40        36%        6%          a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round...
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return...
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession 0.10 ?37% ?9% Mild recession 0.20 ?11% 15% Normal growth 0.35 14% 8% Boom 0.35 30% ?5% a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 2 decimal places.) Mean return = % Variance = b. Calculate the value of the covariance...
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return...
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession 0.10 −32% −10% Mild recession 0.15 −10.0% 6% Normal growth 0.35 22% 10% Boom 0.40 37% −7% a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 4 decimal places.) Mean return % Variance %-Squared b. Calculate the value of the covariance between...
Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession 0.20 –9 %...
Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession 0.20 –9 % 21 % Normal economy 0.70 22 9 Boom 0.10 25 5 b. Calculate the expected rate of return and standard deviation for each investment. (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.)
Consider the following table:     Stock Fund Bond Fund Scenario Probability Rate of Return Rate of...
Consider the following table:     Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession 0.10 −39% −12% Mild recession 0.20 −19% 18% Normal growth 0.40 24% 11% Boom 0.30 29% −8% a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 2 decimal places.)   Mean return % Variance %-Squared b. Calculate the value of the covariance...
Consider the Following Table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return...
Consider the Following Table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return   Severe recession 0.05        −36%        −11%            Mild recession 0.20        −12%        13%            Normal growth 0.40        15%        4%            Boom 0.35        32%        5% 1A) Calculate the values of expected return for the stock fund. (Do not round intermediate calculations. Enter your answer as a decimal number...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT