Question

if the economy booms, meyer&co. stock will have a return of 21.4 percent. if the economy...

if the economy booms, meyer&co. stock will have a return of 21.4 percent. if the economy goes into a recession, the stock will have a loss of 13.7 percent. the probability of a boom is 63 percent

Homework Answers

Answer #1

Note: question doesn't specify, what needs to be calculated. Therefore, Maximum Possible calculations are given. In case, any further answer is needed, please comment.

Economy Probabilty Return Probability*
Return
Return-
Expected Return[D]
Probability*D*D
Boom 0.63 0.214 0.13482 0.12987 0.010625717
Recession 0.37 -0.137 -0.05069 -0.22113 0.018092436
Expected Return
= Sum of Probabilty*Return
0.08413 = 8.413% Variance
=Sum of [D^2]
0.028718153 = 2.8718%
Standard Deviation
=Variance^1/2
0.169464312 = 16.9464%
Co Efficient of Variation =
Standard Deviation/Mean i.e. Expected Return
0.1694643124/0.08413 2.014314896
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