Question

The rate of return on the common stock of Lancaster Woolens is
expected to be 18 percent in a boom economy, 8 percent in a normal
economy, and only 2 percent in a recessionary economy. The
probabilities of these economic states are 12 percent for a boom
and 10 percent for a recession. What is the expected risk on this
common stock? [3 points] a. 0.01150 b. 0.01306 c. 0.12345 d.
0.001389 e. 0.001421

Answer #1

Return during Boom = 18%

Return during Normal = 8%

Return during Recession = 2%

Probability of Boom = 12%

Probability of Normal = 78%

Probability of Recession = 10%

Expected Return = 0.12 * 0.18 + 0.78 * 0.08 + 0.10 * 0.02

Expected Return = 0.0860 or 8.60%

Variance = 0.12 * (0.18 - 0.086)^2 + 0.78 * (0.08 - 0.086)^2 +
0.10 * (0.02 - 0.086)^2

Variance = 0.001524

Standard Deviation = (0.001524)^(1/2)

Standard Deviation = 0.0390 or 3.90%

Therefore, expected risk on this common stock is 0.001524

The rate of return on the common stock of Flowers by Flo is
expected to be 14% in a boom economy, 8% in a normal economy, and
only 2% in a recessionary economy. The probabilities of these
economic states are 20% for a boom, 70% for a normal economy, and
10% for a recession. What is the variance of the returns on the
common stock of Flowers by Flo?
Multiple Choice
.001280
.001044
.001863
.002001
.002471

The rate of return on the common stock of a company is expected
to be 15.50% in a boom economy, 10.50% in a normal economy, and
only 5.00% in a recessionary economy. The probabilities of these
economic states are 38.0% for a boom, 34.0% for a normal economy,
and 28.0% for a recession. What is the variance of the returns on
the common stock of the company?

The rate of return on the common stock of a company is expected
to be 13.25% in a boom economy, 8.25% in a normal economy, and only
2.75% in a recessionary economy. The probabilities of these
economic states are 29.0% for a boom, 52.0% for a normal economy,
and 19.0% for a recession. What is the variance of the returns on
the common stock of the company?

The rate of return on the common stock of a company is expected
to be 12.75% in a boom economy, 7.75% in a normal economy, and only
2.25% in a recessionary economy. The probabilities of these
economic states are 27.0% for a boom, 56.0% for a normal economy,
and 17.0% for a recession. What is the variance of the returns on
the common stock of the company?

q 26 The rate of return on the common stock of a company is
expected to be 13.75% in a boom economy, 8.75% in a normal economy,
and only 3.25% in a recessionary economy. The probabilities of
these economic states are 31.0% for a boom, 48.0% for a normal
economy, and 21.0% for a recession. What is the variance of the
returns on the common stock of the company?

The rate of return on the common stock of a company is expected
to be 13.75% in a boom economy, 8.75% in a normal economy, and only
3.25% in a recessionary economy. The probabilities of these
economic states are 31.0% for a boom, 48.0% for a normal economy,
and 21.0% for a recession. What is the variance of the returns on
the common stock of the company?
0.001255
0.001290
0.001325
0.001360
0.001395

The rate of return on the common stock of a company is expected
to be 11.75% in a boom economy, 6.75% in a normal economy, and only
1.25% in a recessionary economy. The probabilities of these
economic states are 23.0% for a boom, 64.0% for a normal economy,
and 13.0% for a recession. What is the variance of the returns on
the common stock of the company? 0.000878 0.000902 0.000926
0.000949 0.000973

The rate of return on the common stock of a company is expected
to be 11.25% in a boom economy, 6.25% in a normal economy, and only
0.75% in a recessionary economy. The probabilities of these
economic states are 21.0% for a boom, 68.0% for a normal economy,
and 11.0% for a recession. What is the variance of the returns on
the common stock of the company?
Question 4 options:
0.000754
0.000775
0.000796
0.000817
0.000838

The rate of return on the common stock of a company is expected
to be 14.25% in a boom economy, 9.25% in a normal economy, and only
3.75% in a recessionary economy. The probabilities of these
economic states are 33.0% for a boom, 44.0% for a normal economy,
and 23.0% for a recession. What is the variance of the returns on
the common stock of the company?
Question 11 options:
0.001393
0.001431
0.001468
0.001506
0.001544

Question 1
A) If the economy is normal, Stock A is expected to return
10.50%. If the economy falls into a recession, the stock's return
is projected at a negative 14%. If the economy is in a boom the
stock has a projected return of 16.9% The probability of a normal
economy is 60% while the probability of a recession is 20% and boom
is 20%. What is the expected return of this stock? Answer as % and
to first...

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