Question

A stock has an expected return of 10.44 percent. Based on the following information, what is...

A stock has an expected return of 10.44 percent. Based on the following information, what is the stock's return in a boom state of the economy?

State of Economy Probability of State
of Economy		 Rate of Return if
State Occurs
Recession .31 − 9.9 %
Normal .38 11.4 %
Boom .31 ?

30.95%

32.29%

29.60%

25.90%

27.75%

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

29.60%

An stock's return is the sum of return with each probability.
Stock return = Sum of (probability*rate of return)
10.44% = (0.31*-9.9%)+(0.38*11.4%)+(0.31*rate of return in boom state of economy)
10.44% = -3.07%+4.33+(0.31*rate of return in boom state of economy)
10.44% = 1.26%+(0.31*rate of return in boom state of economy)
10.44%-1.26% = 0.31*rate of return in boom state of economy
9.18% = 0.31*rate of return in boom state of economy
rate of return in boom state of economy = 0.296129
Thus,
Rate of return with Boom state of economy is 29.61%
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
1. A stock will have a loss of 11 percent in a bad economy, a return...
1. A stock will have a loss of 11 percent in a bad economy, a return of 10.8 percent in a normal economy, and a return of 24.7 percent in a hot economy. There is 32 percent probability of a bad economy, 37 percent probability of a normal economy, and 31 percent probability of a hot economy. What is the variance of the stock's returns? a. .04097 b. .01536 c. .14313 d. .02049 2. Based on the following information, what...
Based on the following information, what is the standard deviation of returns? State of Economy Probability...
Based on the following information, what is the standard deviation of returns? State of Economy Probability of State of Economy Rate of Return if State Occurs Recession .31 − .099 Normal .38 .114 Boom .31 .224
Calculating Returns and Standard Deviations Based on the following information, calculate the expected return and standard...
Calculating Returns and Standard Deviations Based on the following information, calculate the expected return and standard deviation for the two stocks: State Of economy Probability of state of economy Rate of returns if state occurs Stock A Stock B Recession .25 .06 -.20 Normal .55 .07 .13 Boom .20 .11 .33
(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...
Based on the following information:    Rate of Return If State Occurs   State of Probability of...
Based on the following information:    Rate of Return If State Occurs   State of Probability of   Economy State of Economy Stock A Stock B   Recession .17 .06 – .17   Normal .50 .09 .12   Boom .33 .14 .29    Calculate the expected return for the two stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)    Expected return   Stock A %   Stock B %    Calculate the standard deviation for...
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?
A stock will have a loss of 13.3 percent in a recession, a return of 12...
A stock will have a loss of 13.3 percent in a recession, a return of 12 percent in a normal economy, and a return of 26.7 percent in a boom. There is 30 percent probability of a recession, 39 percent probability of normal economy, and 31 percent probability of boom. What is the standard deviation of the stock's returns?
A stock will have a loss of 13.6 percent in a recession, a return of 12.3...
A stock will have a loss of 13.6 percent in a recession, a return of 12.3 percent in a normal economy, and a return of 27 percent in a boom. There is 33 percent probability of a recession, 36 percent probability of normal economy, and 31 percent probability of boom. What is the standard deviation of the stock's returns?
Based on the following information, what is the variance? State of Economy Probability of State of...
Based on the following information, what is the variance? State of Economy Probability of State of Economy Rate of Return if State Occurs Recession .28 − 10.60% Normal .31 12.10% Boom .41 23.10%
Based on the following information, what is the variance? State of Economy Probability of State of...
Based on the following information, what is the variance? State of Economy Probability of State of Economy Rate of Return if State Occurs Recession .26 − 9.40% Normal .43 10.90% Boom .31 21.90%
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT