Question

We know the following expected returns for stocks A and B, given different states of the...

We know the following expected returns for stocks A and B, given different states of the economy:

State (s) Probability E(rA,s) E(rB,s)
Recession 0.2 -0.05 0.05
Normal 0.5 0.1 0.08
Expansion 0.3 0.18 0.12

  

1. What is the expected return for stock A?

2. What is the expected return for stock B?

3. What is the standard deviation of returns for stock A?

4. What is the standard deviation of returns for stock B?

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
We know the following expected returns for stock A and the market portfolio, given different states...
We know the following expected returns for stock A and the market portfolio, given different states of the economy: State (s) Probability E(rA,s) E(rM,s) Recession 0.2 -0.02 0.02 Normal 0.5 0.13 0.05 Expansion 0.3 0.21 0.09 The risk-free rate is 0.02. Assuming the CAPM holds, what is the beta for stock A?
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (7%) (28%) 0.3 2 0 0.3 12 18 0.2 20 25 0.1 39 37 Calculate the expected rate of return, rB, for Stock B (rA = 11.40%.) Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the standard deviation of expected returns, σA, for Stock A (σB = 17.60%.) Do not round intermediate calculations. Round your...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (5%) (27%) 0.2 4 0 0.3 11 19 0.2 18 29 0.2 33 48 Calculate the expected rate of return, rB, for Stock B (rA = 13.80%.) Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the standard deviation of expected returns, ?A, for Stock A (?B = 21.72%.) Do not round intermediate calculations. Round your...
You've estimated the following expected returns for a stock, depending on the strength of the economy:...
You've estimated the following expected returns for a stock, depending on the strength of the economy: State (s) Probability Expected return Recession 0.3 -0.02 Normal 0.5 0.09 Expansion 0.2 0.14 1. What is the expected return for the stock? 2. What is the standard deviation of returns for the stock?
The table below shows the expected rates of return for three stocks and their weights in...
The table below shows the expected rates of return for three stocks and their weights in some portfolio: Stock A Stock B Stock C Portfolio weights 0.3 0.2 0.5 State Probability Expected returns Recession 0.2 0.08 0.03 0.14 Boom 0.8 0.13 0.05 0.15 1. What is the portfolio return during a recession? 2. What is the expected portfolio return? 3. What is the standard deviation of the portfolio returns?
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.2 (10%) (21%) 0.2 3 0 0.3 13 23 0.2 24 30 0.1 28 38 a.Calculate the expected rate of return, rB, for Stock B (rA = 10.10%.) Do not round intermediate calculations. Round your answer to two decimal places. b.Calculate the standard deviation of expected returns, σA, for Stock A (σB = 20.37%.) Do not round intermediate calculations. Round your answer to two...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (12%) (20%) 0.2 6 0 0.4 16 19 0.2 21 25 0.1 34 41 Calculate the expected rate of return, rB, for Stock B (rA = 14.00%.) Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the standard deviation of expected returns, ?A, for Stock A (?B = 16.17%.) Do not round intermediate calculations. Round your...
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (11%) (29%) 0.2 2 0 0.4 12 20 0.2 18 30 0.1 36 44 A. Calculate the expected rate of return, rB, for Stock B (rA = 11.30%.) Do not round intermediate calculations. Round your answer to two decimal places. B. Calculate the standard deviation of expected returns, σA, for Stock A (σB = 19.43%.) Do not round intermediate calculations. Round your answer...
Based on your research, the following states of economy, probabilities of states, and returns are forecasted...
Based on your research, the following states of economy, probabilities of states, and returns are forecasted for Stock A and Stock B: Return if State Occurs State of Economy Probability of state Stock A Stock B Recession 0.65 -0.15 -0.2 Normal 0.3 0.13 0.14 Irrational exuberance 0.05 0.2 0.29 a. What is the expected return on Stock A? b. What is the expected return on Stock B? c. Your research also indicates that stock A’s beta is greater than stock...
Given the returns for two stocks with the following information, calculate the correlation coefficient of the...
Given the returns for two stocks with the following information, calculate the correlation coefficient of the returns for the two stocks. Assume the expected return is 14.4 percent for Stock 1 and 15.9 percent for Stock 2. Do not round intermediate computations. Prob                Stock 1            Stock 2                         0.5                   0.11                 0.18 0.3                   0.17                 0.15 0.2                   0.19                 0.12
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT