Question

The return on Luccasen Corp. next year depends on how strong the economy is:

Economy Probability Return

very strong 0.2 25%

normal 0.4 8%

weak 0.3 4%

recession 0.1 -10%

What is the expected return (average) based on this information?

What is the standard deviation of these returns?

Answer #1

Answer :-

**Expected Return (based on information above) :-
8.40%**

**Standard Deviation of these returns :- 9.74**

Detailed calculation & explanation is attached below :

Company share’s return has the following distribution:
Demand for the Company’s Products
Probability of this demand occurring
Rate of return if this demand occurs (%)
Weak
0.1
-50
Below Average
0.2
-15
Average
0.4
16
Above Average
0.2
25
Strong
0.1
60
Required:
Calculate the share’s expected return and standard deviation.

A stock’s return has the following
distribution:
Demand for
Products
Probability of Occurrence of
Demand
Return if
Demand Occurs
Weak
0.1
-40%
Below
Average
0.2
-5
Average
0.4
12
Above
Average
0.2
21
Strong
0.1
50
Calculate the stock’s expected return and standard
deviation.

1. Consider an economy with four possible economic states: Boom,
Normal, Slow Growth, and Recession which have a 0.2, 0.3, 0.4, and
0.1 probability of occurring, respectively. You are considering a
stock which is expected to return 12%, 9%, 4%, and 2%,
respectively, in each of those states. What is the expected return
on the stock?
The answer to the above is 6.9%. I need the next question
answered.
2. What is the standard deviation of the above stock's return?...

You've estimated the following expected returns for a stock,
depending on the strength of the economy:
State Probability Expected return
Recession 0.1 -0.01
Normal 0.5 0.1
Expansion 0.4 0.15
What is the standard deviation of returns for the stock?

Given the following information:
State of Economy
Probability
Rate of Return if State Occurs Stock G
Rate of Return if State Occurs Stock H
Boom
0.3
12%
25%
Normal
0.5
15%
10%
Recession
0.2
6%
-18%
Suppose you hold a portfolio with 60% invested in G and 40%
invested in H.
(1) What is the portfolio’s return if each state of the economy
occurs, respectively?
(2) What is the portfolio’s expected return?
(3) What is the portfolio’s standard deviation?

EXPECTED RETURN A stock’s returns have the following
distribution: Demand for the Company’s Products Weak Below average
Average Above average Strong Probability of this Demand Occurring
0.1 0.1 0.3 0.3 0.2 1.0 Rate of Return if this Demand Occurs (30%)
(14) 11 20 45 Assume the risk-free rate is 2%. Calculate the
stock’s expected return, standard deviation, coefficient of
variation, and Sharpe ratio.
1Expected return = 0.1*(-30%) + 0.1*(-14%) + 0.3*(11%) +
0.3*(20%) + 0.2*(45%) = 13.90%
Standard deviation =...

A stock's return has the following distribution:
Calculate the standard deviation. Round your answer to two
decimal places
Demand for the
Company's Products
Probability of This
Demand Occurring
Rate of Return if This
Demand Occurs (%)
Weak
0.1
-25%
Below average
0.2
-5
Average
0.4
8
Above average
0.2
25
Strong
0.1
55
1.0

A stock's returns have
the following distribution:
Demand for the
Company's Products
Probability of This
Demand Occurring
Rate of Return If
This Demand Occurs
Weak
0.1
(46%)
Below average
0.4
(8)
Average
0.3
16
Above average
0.1
20
Strong
0.1
53
1.0
Assume the risk-free
rate is 3%. Calculate the stock's expected return, standard
deviation, coefficient of variation, and Sharpe ratio. Do not round
intermediate calculations. Round your answers to two decimal
places.
Stock's expected
return: %
Standard deviation:
%...

1. Consider following information:
Probability of the state of economy
Rate of return if state occurs
Stock SSS
Recession
0.1
4 %
Normal
0.5
10 %
Boom
0.4
12.1 %
Calculate the expected return of a stock. Express your answer as
%.
2. Consider the same info as before:
Probability of the state of economy
Rate of return if state occurs
Stock SSS
Recession
0.1
4 %
Normal
0.5
10 %
Boom
0.4
12.1 %
Calculate the standard deviation of...

EXPECTED
RETURN
A stock's returns have
the following distribution:
Demand for the
Company's Products
Probability of This
Demand Occurring
Rate of Return If
This Demand Occurs
Weak
0.2
(38%)
Below average
0.1
(6)
Average
0.3
13
Above average
0.1
26
Strong
0.3
61
1.0
Calculate the stock's
expected return. Round your answer to two decimal places.
%
Calculate the stock's
standard deviation. Do not round intermediate calculations. Round
your answer to two decimal places.
%
Calculate the stock's
coefficient of...

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