Question

**Question 7**: Smith Inc. is considering an
investment in one of two common stocks. Given the following
information, which investment is better, based on the risk (as
measured by the standard deviation) and return of each? (Please
calculate the expected rate of return of each investment and its
corresponding standard deviation)

Common Stock A:

*Probability* *Return*

0.30 10%

0.40 16%

0.30 18%

Common Stock B:

*Probability* *Return*

0.20 - 4%

0.30 6%

0.30 13%

0.20 21%

Answer #1

Syntex, Inc. is considering an investment in one of two common
stocks. Given the information that follows, which investment is
better, based on the risk (as measured by the standard deviation)
and return?
Common Stock A
Common Stock B
Probability
Return
Probability
Return
0.35
12%
0.25
-4%
0.3
14%
0.25
5%
0.35
21%
0.25
15%
0.25
20%
Given the information in the table, the expected rate of return
for stock A is??

(Expected rate of return and risk) Syntex, Inc. is
considering an investment in one of two common stocks. Given the
information that follows, which investment is better, based on
the risk (as measured by the standard deviation) and return?
Common Stock A
Common Stock B
Probability
Return
Probability
Return
0.20
13%
0.25
−4%
0.60
16%
0.25
8%
0.20
18%
0.25
15%
0.25
23%
a. Given the information in the table, the expected rate of
return for stock A is...

Syntex Ltd is considering an investment in one of two ordinary
shares. Given the information that follows, which investment is
better, based on the risk (as measured by the standard deviation)
and return?
Share A
Share B
Probability
Return
Probability
Return
0.35
13%
0.15
−4%
0.30
16%
0.35
55%
0.35
20%
0.35
13%
0.15
20%
a. Given the information in the table, the expected rate of
return for share A is
____%.
(Round to two decimal places.)The standard deviation of...

After a tumultuous period in the stock market, Logan Morgan is
considering an investment in one of two portfolios. Given the
information that follows, which investment is better, based on
risk (as measured by the standard deviation) and return as
measured by the expected rate of return?
Portfolio A
Portfolio B
Probability
Return
Probability
Return
0.15
−3%
0.08
4%
0.50
17%
0.28
10%
0.35
23%
0.42
11%
0.22
15%
a. What is the expected rate of return and standard deviation...

The following are estimates for two stocks.
Stock
Expected Return
Beta
Firm-Specific Standard Deviation
A
11
%
0.90
32
%
B
16
1.40
40
The market index has a standard deviation of 19% and the
risk-free rate is 11%.
a. What are the standard deviations of stocks
A and B?
b. Suppose that we were to construct a
portfolio with proportions:
Stock A
0.40
Stock B
0.40
T-bills
0.20
Compute the expected return, standard deviation, beta, and
nonsystematic standard deviation...

You are considering making additional investments, and have
gathered data about
two risky stocks:
Stock: CVX
Expected Return: 11.5%
Beta: 1.10
Firm-Specific Standard Deviation: 24%
Stock: Forsythe Inc.
Expected Return: 16%
Beta: .75
Firm-Specific Standard Deviation: 28%
Assumptions: The expected market return (as measured by the
S&P 500 Index) is 10%. The
standard deviation of the S&P 500 Index is 15%.
a. Calculate the standard deviation of CVX.
b. Calculate the standard deviation of Forsythe.
c. Calculate the covariance between...

See the expected returns and standard deviation of returns for
five restaurant stocks. Which one of these stocks is most
attractive to a risk-averse investor? Why?
Stock
Return
Standard Deviation
Super Foods, Inc.
15%
9%
Crazy Snacks, Co.
12%
7.8%
Jedi Fast Food, Inc.
11%
8.5%
Porter’s Dining, Inc.
21%
18%
Truman Restaurants
18.5%
12%

QUESTION TWO [35]
The following information relates to Netherton’s investment
performance, during various economic conditions. estimate the
expected return and overall risk (standard deviation) of this
investment.
Economic Conditions
Probability
Expected Return
Boom
0.20
+40%
Normal
0.60
+15%
Recession
0.20
-10%
Required:
2.1. Calculate the expected risk of return of this investment.
(10)
2.2. Estimate the overall risk (standard deviation) of this
investment. (15)
2.3. Discuss the difference between expected return and required
return. (10)

Question 11 pts
Tommy wishes to determine the return on two stocks she owned in
2019.
At the beginning of the year, stock X traded for $51per share.
During the year, X paid dividends of $9
At the end of the year, Xstock was worth $92
Calculate the annual rate of return, r, for X
(Enter the answer in % format without % sign -> 20.51 and not
20.51% or 0.2051)
Question 21 pts
Suppose you have an investment in...

Question two
Discuss the statement that wealth maximization is a better
corporate objective than profit maximization.
Master Boat has issued 1,000 ordinary shares at K1 per share
which will later be converted to bonds at a nominal value of K1.2
per share. What will be the price of bonds if they are issued for 5
years with a coupon rate of 10% and yield to maturity of 12% if
interest is compounded semi-annually?
There are two assets and three states...

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