Question

Consider the following information: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Recession .17 .08 ? .12 Normal .58 .11 .17 Boom .25 .16 .34 Calculate the expected return for 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 for each stock. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Standard deviation Stock A % Stock B %

Answer #1

Stock A:

Expected Return = 0.17 * 0.08 + 0.58 * 0.11 + 0.25 * 0.16

Expected Return = 0.1174

Expected Return = 11.74%

Variance = 0.17 * (0.08 - 0.1174)^2 + 0.58 * (0.11 - 0.1174)^2 +
0.25 * (0.16 - 0.1174)^2

Variance = 0.000723

Standard Deviation = (0.000723)^(1/2)

Standard Deviation = 0.0269

Standard Deviation = 2.69%

Stock B:

Expected Return = 0.17 * (-0.12) + 0.58 * 0.17 + 0.25 *
0.34

Expected Return = 0.1632

Expected Return = 16.32%

Variance = 0.17 * (-0.12 - 0.1632)^2 + 0.58 * (0.17 - 0.1632)^2
+ 0.25 * (0.34 - 0.1632)^2

Variance = 0.021476

Standard Deviation = (0.021476)^(1/2)

Standard Deviation = 0.1465

Standard Deviation = 14.65%

Consider the following information:
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Recession
.20
.08
−
.15
Normal
.50
.11
.14
Boom
.30
.16
.31
a.
Calculate the expected return for Stocks A and B. (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 for Stocks A and B. (Do
not round intermediate...

Consider the following information:
Rate of Return if State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Recession
.10
.04
−
.17
Normal
.60
.09
.12
Boom
.30
.17
.27
a.
Calculate the expected return for Stocks A and B. (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 for Stocks A and B.
(Do not round intermediate...

Consider the following information:
Rate of Return if State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Recession
.10
.04
−
.17
Normal
.60
.09
.12
Boom
.30
.17
.27
a.
Calculate the expected return for Stocks A and B. (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 for Stocks A and B.
(Do not round intermediate...

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Rate of Return If State Occurs
State of Economy
Probability of State of Economy
Stock A
Stock B
Recession
.18
.07
−.18
Normal
.55
.10
.11
Boom
.27
.15
.28
Calculate the expected return for the two stocks. (Do not
round intermediate calculations. Enter your answers as a percent
rounded to 2 decimal places, e.g., 32.16.)
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Stock B
%
Calculate the standard deviation for the two stocks. (Do
not round intermediate...

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Rate of Return if State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.10
.35
.40
.27
Good
.60
.16
.17
.08
Poor
.25
−
.01
−
.03
−
.04
Bust
.05
−
.12
−
.18
−
.09
a.
Your portfolio is invested 30 percent each in A and C, and 40
percent in B. What is the expected return of the portfolio?
(Do not round...

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Rate of Return if State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.10
.35
.40
.27
Good
.60
.16
.17
.08
Poor
.25
−
.01
−
.03
−
.04
Bust
.05
−
.12
−
.18
−
.09
a.
Your portfolio is invested 30 percent each in A and C, and 40
percent in B. What is the expected return of the portfolio?
(Do not round...

Consider the following information:
Rate of Return If State Occurs
State of
Probability
of
Economy
State of
Economy
Stock A
Stock B
Recession
.25
.04
–.17
Normal
.30
.10
.17
Boom
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a.
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percent rounded to 2 decimal places. Omit the "%" sign in your
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Rate of Return if State Occurs
State of
Probability of
State
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Stock A
Stock B
Recession
.23
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Normal
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.18
Boom
.19
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Requirement
1:
Calculate the expected return for the two stocks.
(Do not round intermediate calculations.
Enter your answers as a percentage rounded to 2
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Expected
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State of
Probability of
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State of Economy
Stock A
Stock B
Recession
.17
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Normal
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.09
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Boom
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