Question

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?

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 |

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, 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 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 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 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, 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, 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 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 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 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

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 11 minutes ago

asked 25 minutes ago

asked 25 minutes ago

asked 26 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago