Question

Suppose there are two potential states of the economy for next year: boom and bust, with equal probability to occur. The return of Stock B will be 18% in a boom state and -6% in a bust state. Find out the standard deviation of Stock B. Group of answer choices

6%

12%

18%

14.4%

-6%

Answer #1

After some study of the economy, your forecast for next year is
that a boom economy has a 30% chance of occurring, a neutral
economy 50%, and a bust economy a 20% chance of occurring. You also
estimate that a certain stock would have a return of 31% in a boom
economy next year, 16% in a neutral economy , and -14% in a bust
economy. The risk-free rate is 4.4%. What is the standard deviation
of expected returns for...

State of
Economy
Probability of
State of Economy
Roll
Ross
Bust
.30
–12
%
16
%
Boom
.70
23
6
Calculate the standard deviations for Roll and Ross by filling
in the following table (verify your answer using returns expressed
in percentages as well as decimals): (Negative values
should be indicated by a minus sign. Do not round intermediate
calculations. Round your Standard deviation answers to 2 decimal
places and other answers to 4 decimal places. Omit the "%" sign...

Suppose an economy has three states: boom, normal, and
recession. Assume that the probability of a boom state is 0.2, a
normal state is 0.5, and a recession state is 0.3. And there are
three stocks in this economy, called Alpha, Beta, and Gamma
respectively. The return performance of these stocks has been
summarized by the following table:
Alpha
Beta
Gamma
boom
15%
28%
1%
normal
6%
12%
3%
recession
-12%
-30%
20%
(Please show your intermediate processes, instead of...

Security Returns if State Occurs
State of
Economy
Probability of
State of Economy
Roll
Ross
Bust
0.60
–14
%
15
%
Boom
0.40
32
5
Calculate the standard
deviations for Roll and Ross by filling in the following table:
(A negative value should be indicated by a minus
sign. Do not round intermediate
calculations. Round your answers to 4 decimal
places.)
State of
Economy
Probability of State of Economy
Return
Deviation from Expected Return
Squared
Return Deviation
Product
Roll
Bust...

QUESTION 28 After some study of the economy, your forecast for
next year is that a boom economy has a 30% chance of occurring, a
neutral economy 50%, and a bust economy a 20% chance of occurring.
You also estimate that a certain stock would have a return of 31%
in a boom economy next year, 21% in a neutral economy , and -10% in
a bust economy. The risk-free rate is 4.5%. What is the standard
deviation of expected...

There are two assets and three states of the economy, answer
questions 11 to 15.
State of Economy
Probability of State of Economy
Return of Stock A if State Occurs
Return of Stock B if State Occurs
Recession
0.30
-0.20
0.10
Normal
?
0.30
0.20
Boom
0.15
0.40
0.30
What is the expected return for Stock A?
What is the standard deviation for Stock A?
Suppose you have $50,000 total. If you put $20,000 in Stock A
and the remainder...

There are two assets and three states of the economy, answer
questions 11 to 15.
State of Economy
Probability of State of Economy
Return of Stock A if State Occurs
Return of Stock B if State Occurs
Recession
0.30
-0.20
0.10
Normal
?
0.30
0.20
Boom
0.15
0.40
0.30
What is the expected return for Stock A?
What is the standard deviation for Stock A?
Suppose you have $50,000 total. If you put $20,000 in Stock A
and the remainder...

There are two assets and three states of the economy, answer
questions 32 to 34.
State of Economy
Probability of State of Economy
Return of Stock A if State Occurs
Return of Stock B if State Occurs
Recession
0.30
-0.10
0.08
Normal
?
0.20
0.15
Boom
0.20
0.30
0.20
Suppose you have $50,000 total. If you put $30,000 in Stock A
and the remainder in Stock B, what are the portfolio returns in
each state?
Suppose you have $50,000 total....

There are three possible states of nature--boom, normality, and
bust--with probabilities .2, .6, and .2. In these three states,
Stock A has expected future returns of -16.8, 6.6, and 19.8
percent. Stock B has expected future returns of -16.5, 9.9, and
16.7 percent. What is the expected return on a portfolio invested
half in Stock A and half in Stock B in percent?

Suppose you have predicted the following stock returns for CYM
Hotel Group in three possible states of the economy. What is the
standard deviation of this stock?
State of Economy
Probability Return
Boom
30% 25%
Normal
70% 11%
a. 6.42%
b. 1.52%
c. 3.23%
d. 4.44%

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