Question

You are attempting to forecast the return of the S&P 500 under a variety of economic...

  1. You are attempting to forecast the return of the S&P 500 under a variety of economic scenarios. You have determined that there is a 10% chance of the U.S. entering a recession, a 70% chance of the U.S. experiencing normal growth and 20% chance of the U.S. experiencing above-normal growth. You expect the S&P 500 to return -20%, +8% and +30% returns under each of these scenarios. What is your expected return for the S&P 500?
    1. 5.2%
    2. 6.0%
    3. 9.6%
    4. 13.6%
    5. 15.1%
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Ans is c. 9.6%Please upvote if the ans is helpful. In case of doubt,do comment. Thanks.

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
Use the following information about Ford and S&P 500 to solve the question below. State Probability...
Use the following information about Ford and S&P 500 to solve the question below. State Probability S&P 500 return Ford’s return Recession 0.30 -18% -22% Normal 0.50 10% 12% Boom 0.20 14% 20% A. What is the expected return on the S&P 500? B. What is the expected return in a recession of a portfolio of 70% S&P 500 and the remainder in Ford?
You have gathered the following data, all of which is dated March 29, 2018: S&P 500...
You have gathered the following data, all of which is dated March 29, 2018: S&P 500 Index level: 2,640.87 S&P 500 forward earnings estimate: $160.15 S&P 500 P/E (forward): 16.49 S&P 500 P/B: 3.27 10-year T-Note yield: 2.74% CPI inflation rate (year-over-year change): 2.40% What is the earnings yield for the S&P 500? Based on the predictions of the Fed Model, are U.S. equities undervalued or overvalued? Why is this the case? To receive full credit, you must show all...
ANSWER QUESTIONS 3 PLEASE Expected Rate of return Scenario Probability T-Bills S&P 500 Utility Company High-Tech...
ANSWER QUESTIONS 3 PLEASE Expected Rate of return Scenario Probability T-Bills S&P 500 Utility Company High-Tech Company Counter-Cyclical Company Recession 20% 5% -10% 6% -25% 20% Near Recession 20% 5% -6% 7% -20% 16% Normal 30% 5% 12% 9% 15% 12% Near Boom 10% 5% 15% 11% 25% -9% Boom 20% 5% 20% 14% 35% -20% Based on the above returns, Jenna calculated the betas of the three stocks as follows: Beta of Utility Company = 0.22 Beta of High-Tech...
Consider a study where Y={monthly S&P 500 "return" (%change in price)} and X={uncertainty in government economic...
Consider a study where Y={monthly S&P 500 "return" (%change in price)} and X={uncertainty in government economic policies}. The author acknowledges that a regression of Y on X has omitted variable bias because policy uncertainty is generally higher when the economy is doing worse. (For example, think about what you heard in the news during the Great Recession about economic policies compared to a few years earlier.) The author proposes to remedy this by including a dummy variable D=1 during official...
You manage a U.S. core equity portfolio that is sector-neutral to the S&P500 Index (its industry...
You manage a U.S. core equity portfolio that is sector-neutral to the S&P500 Index (its industry sector weights approximately match the S&P 500's). Taking a weighted average of the projected mean returns on the holdings, you forecast a portfolio return of 12%. You estimate a standard deviation of annual return of 22%, which is close to the long-run figure for the S&P 500. For the year-ahead return on the portfolio, assuming Normality for portfolio returns, you are asked to do...
If returns of​ S&P 500 stocks are normally​ distributed, what range of returns would you expect...
If returns of​ S&P 500 stocks are normally​ distributed, what range of returns would you expect to see​ 95% of the​ time? Base your answer on the information below. Small Stocks, ​S&P 500, Corporate Bonds, ​T-Bills, (Average Return): 18.52​%, 11.61​%, 6.02​%, 4.77​% (Standard Deviation of returns): 38.52​%, 20.49​%, 7.28​%, 3.74​% The​ 95% prediction interval of the​ S&P500 is between ___​% and ___%. ​(Round to two decimal places and put the lower number​ first.)
The? risk-free rate is 4.3?% and you believe that the? S&P 500's excess return will be...
The? risk-free rate is 4.3?% and you believe that the? S&P 500's excess return will be 11.9?% over the next year. If you invest in a stock with a beta of 1.2 ?(and a standard deviation of 30?%), what is your best guess as to its expected excess return over the next? year? The expected excess return over the next year is ____%. ?(Round to two decimal? places.)
The S&P 500 index of U.S. stocks has an expected return of 0.10 and a variance...
The S&P 500 index of U.S. stocks has an expected return of 0.10 and a variance of 0.04, and the index of Emerging Market stocks has an expected return of 0.08 and a variance of 0.03. Their correlation is 0.25 and the risk-free rate is 0.03. What is your optimal allocation to the Emerging Market stocks if you maximize your tradeoff between portfolio expected return and variance, your risk aversion is 3, and you do not face any financial constraints?...
You run a regression of monthly returns of firm A on the S&P 500 index with...
You run a regression of monthly returns of firm A on the S&P 500 index with an expected return of 12% and obtain the following output: Intercept of the regression = 0.052 Coefficient on the market return = 0.5 a. What would an investor in firm A's stock require as a return, if the T-Bond rate is 2%? b. Did your stock perform better than the market? Explain.
You have the option to invest in an S&P 500 Index fund that guarantees the average...
You have the option to invest in an S&P 500 Index fund that guarantees the average performance of stocks in the index. Assume that exactly 500 companies are in the economy and thus beta for this index fund is equal to 1, while the expected return of this index fund is 20%. An alternative risk-free asset has a return rate of 10%. Using the straight-line tool, draw the market line that plots the relationship between expected returns and beta. Consider...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT