Question

Darren has the option of investing in either Stock A or Stock B. The probability of...

Darren has the option of investing in either Stock A or Stock B. The probability of the return of Stock A being 25% is 0.45, 14% is 0.25, and 4% is 0.30. The probability of the return of Stock B being 30% is 0.30, 9% is 0.25, and 2% is 0.45. Given the probability distributions for the two investments, what is the expected rate of return for Stock A and Stock B?​ a. ​15.95%; 12.15% b. ​15.95%; 11.45% c. ​14.75%; 13.75% d. ​13.65%; 12.85% e. ​17.82%; 11.95%

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

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
You are given the following probability distribution of returns of two stocks A and B. If...
You are given the following probability distribution of returns of two stocks A and B. If you form a portfolio by investing $750,000 in stock A and $1,250,000 in Stock B, calculate the expected return of your portfolio. State of Economy Probability of State Return of Stock A Return of Stock B Recession 0.10 55% -20% Slow Down 0.20 40% 10% Normal Economy 0.45 10% 15% Boom 0.25 -20% 40%
You are faced with the probability distribution of the HPR on the stock market index fund...
You are faced with the probability distribution of the HPR on the stock market index fund given in Spreadsheet 5.1 of the text. Suppose the price of a put option on a share of the index fund with exercise price of $110 and time to expiration of 1 year is $12, and suppose the risk-free interest rate is 6% per year. You are contemplating investing $107.55 in a 1-year CD and simultaneously buying a call option on the stock market...
Sameer has saved $84,500 over the years and she has the option of investing it in...
Sameer has saved $84,500 over the years and she has the option of investing it in either of the following two investment plans. Investment A offers 14 percent interest compounded monthly, whereas Investment B pays 16 percent interest compounded semiannually. What would be the difference between the interests earned on the two investments if Sameer's investment horizon is five years? (Round your answer to two decimal places.) a. $10,865.52 b. $11,725.32 c. $12,955.13 d. $13,528.25
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 probability distribution for stocks A and B: State   Probability Return on Stock A...
Consider the following probability distribution for stocks A and B: State   Probability Return on Stock A Return on Stock B 1 0.10 10% 8% 2 0.20 13% 7% 3 0.20 12% 6% 4 0.30 14% 9% 5 0.20 15% 8% The coefficient of correlation between A and B is (Hint: compute variance and covariance first.) Group of answer choices 0.47. none of the above. 0.60. 0.58 1.20.
Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A...
Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A Stock B Stock C Boom 0.30 50.0% 12.0% 20.0% Average 0.45 15.0% -5.0% 6.0% Recession 0.25 -8.0% 2.0% -3.2% Your portfolio manager has invested 30% of your money in Stock A, 50% in Stock B, and the rest in Stock C. 1. What is the correlation coefficient between Stocks B and C? 2. What is the standard deviation of your portfolio? Hint: Instead of...
Suppose a bank has $100 million of assets to invest in either risky or safe investments....
Suppose a bank has $100 million of assets to invest in either risky or safe investments. The first option is to put all assets in the safe investment, which will result in a 5% return and yield $105 one year from now. A second option is to put all the assets in the risky option, which will result in either a 50% return ($150 million) or a 40% loss ($60 million) with equal probability. A third option is to split...
QUESTION 4 (8 Marks) You are considering investing either of the three stocks- A, B and...
QUESTION 4 You are considering investing either of the three stocks- A, B and C. The following table provides the information regarding the stocks Returns (in percent) Probability Stock A Stock B Stock C 0.20 2 -3 5 0.50 10 8 8 ? 15 20 12 Based on the above information Calculate the expected rate of returns and variance for each of the three stocks?                                                                                                                Calculate the coefficient of variation for each security?                                    c) Your friend suggests you...
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 –40 % –9 % Mild recession 0.25 –14 % 15 % Normal growth 0.40 17 % 8 % Boom 0.30 33 % –5 % b. Calculate the value of the covariance between the stock and bond funds. (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) Covariance %-Squared   
Suppose a bank has $100 million of assets to invest in either risky or safe investments....
Suppose a bank has $100 million of assets to invest in either risky or safe investments. The first option is to put all assets in the safe investment, which will result in a 5% return and yield $105 one year from now. A second option is to put all the assets in the risky option, which will result in either a 50% return ($150 million) or a 40% loss ($60 million) with equal probability. If the bank can pay to...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT