Question

KNF stock is quite cyclical. In a boom economy, the stock is expected to return 34...

KNF stock is quite cyclical. In a boom economy, the stock is expected to return 34 percent in comparison to 13 percent in a normal economy and a negative 22 percent in a recessionary period. The probability of a recession is 15 percent while the chance of a boom is 4 percent. What is the standard deviation of the returns this stock?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Ans 13.49%

Stock PROBABILITY RETURN (Y) Return* Probability P * (Y -Average Return of Y)^2
BOOM 4.00% 34.00 1.36 25.83
NORMAL 81.00% 13.00 10.53 15.75
RECESSION 15.00% -22.00 -3.30 140.36
TOTAL 25.00 8.59 181.94
Expected Return = Return * Probability
8.59%
VARIANCE = P * (Y -Average Return of Y)^2
181.9419
Standard Deviation = Square root of (P * (Y -Average Return of Y)^2)
Square root of 181.94
13.49
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
Leftover stock is expected to return 26 percent in a boom, 4 percentin a normal economy,...
Leftover stock is expected to return 26 percent in a boom, 4 percentin a normal economy, and lose 25 percent in a recession. The probabilities of a boom, normal economy, and a recession are 2 percent, 93 percent, and 5 percent, respectively. What is the expected return on this stock? a.3.99 percent b. 2.99 percent c. 1.99 percent d.0.99percent What is the variance on this stock? a. 0.005071 b. 0.004927 c.0.003896 d.0.005001 What is the standard deviation of the returns...
You recently purchased a stock that is expected to earn 33 percent in a booming economy,...
You recently purchased a stock that is expected to earn 33 percent in a booming economy, 13 percent in a normal economy, and lose 40 percent in a recessionary economy. There is a 15 percent probability of a boom and a 60 percent chance of a normal economy. What is standard deviation on this stock?
If the economy booms, Meyer&Co. stock will have a return of 23.3 percent. If the economy...
If the economy booms, Meyer&Co. stock will have a return of 23.3 percent. If the economy goes into a recession, the stock will have a loss of 11.8 percent. The probability of a boom is 66 percent while the probability of a recession is 34 percent. What is the standard deviation of the returns on the stock?
(20 pts.) Ada Hotel & Resorts’ stock is expected to return 8.5 percent if the economy...
(20 pts.) Ada Hotel & Resorts’ stock is expected to return 8.5 percent if the economy is normal. If the economy falls into a recession, the stock's return is projected at a negative 5.4 percent. If the economy booms, the stock’s return is expected to be 12 percent. The probability of a normal economy is 60 percent while the probability of a recession and boom is 20 percent each. Given this information, what is the expected return and variance of...
The probability the economy will boom is 10 percent while the probability of a recession is...
The probability the economy will boom is 10 percent while the probability of a recession is 20 percent. Stock A is expected to return 15 percent in a boom, 9 percent in a normal economy, and lose 14 percent in a recession. Stock B should return 10 percent in a boom, 6 percent in a normal economy, and 2 percent in a recession. Stock C is expected to return 5 percent in a boom, 7 percent in a normal economy,...
You recently purchased a stock that is expected to earn 20 percent in a booming economy,...
You recently purchased a stock that is expected to earn 20 percent in a booming economy, 10 percent in a normal economy, and lose 30 percent in a recessionary economy. There is a 5 percent probability of a boom and an 80 percent chance of a normal economy. What is the expected rate of return and standard deviation on this stock?
You recently purchased a stock that is expected to earn 17 percent in a booming economy,...
You recently purchased a stock that is expected to earn 17 percent in a booming economy, 12 percent in a normal economy, and lose 5 percent in a recessionary economy. There is 17 percent probability of a boom, 66 percent chance of a normal economy, and 17 percent chance of a recession. What is your expected rate of return on this stock? 8.00% 4.17% 9.96% 4.98% 9.67%
There is a 20 percent probability the economy will boom; a 20 percent probability of a...
There is a 20 percent probability the economy will boom; a 20 percent probability of a recesion and otherwise, it will be normal. The Smith Company stock is expected to return 12 percent in a boom, 8 percent in a normal economy and -3 percent in a recession. The Johnson Company stock is expected to return 15 percent in a boom, 4 percent in a normal economy and -3 percent otherwise. What is the standard deviation of a portfolio that...
. Stock S is expected to return 12 percent in a boom and 6 percent in...
. Stock S is expected to return 12 percent in a boom and 6 percent in a normal economy. Stock T is expected to return 20 percent in a boom and 4 percent in a normal economy. There is a probability of 40 percent that the economy will boom; otherwise, it will be normal. What is the portfolio variance and standard deviation if 30 percent of the portfolio is invested in Stock S and 70 percent is invested in Stock...
A stock will have a loss of 12.5 percent in a recession, a return of 11.2...
A stock will have a loss of 12.5 percent in a recession, a return of 11.2 percent in a normal economy, and a return of 25.9 percent in a boom. There is 22 percent probability of a recession, 47 percent probability of normal economy, and 31 percent probability of boom. What is the standard deviation of the stock's returns?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT