Question

An investor purchases a share of Synovous Bank stock this morning for $2.80. The investor believes the economy will take one of three conditions in the coming year, and each condition will have an impact on the selling price of the stock. The investor’s beliefs about the economy are shown below:

OUTCOME: | Probability | Synovous Price in One Year |
---|---|---|

Bad for Banks | 0.34 | $2.56 |

Moderate for Banks | 0.31 | $2.98 |

Good for Banks | 0.35 | $3.44 |

What is the standard deviation for Synovous returns (based on the investor’s returns)?

**Answer Format: Percentage Round to: 2 decimal places
(Example: 9.24%, % sign required. Will accept decimal format
rounded to 4 decimal places (ex: 0.0924))**

Answer #1

Bad for Banks:

Investor’s Return = (Price in One Year - Current Price) /
Current Price

Investor’s Return = ($2.56 - $2.80) / $2.80

Investor’s Return = -0.0857

Moderate for Banks:

Investor’s Return = (Price in One Year - Current Price) /
Current Price

Investor’s Return = ($2.98 - $2.80) / $2.80

Investor’s Return = 0.0643

Good for Banks:

Investor’s Return = (Price in One Year - Current Price) /
Current Price

Investor’s Return = ($3.44 - $2.80) / $2.80

Investor’s Return = 0.2286

Expected Return = 0.34 * (-0.0857) + 0.31 * 0.0643 + 0.35 *
0.2286

Expected Return = 0.0708

Variance = 0.34 * (-0.0857 - 0.0708)^2 + 0.31 * (0.0643 -
0.0708)^2 + 0.35 * (0.2286 - 0.0708)^2

Variance = 0.0170558

Standard Deviation = (0.0170558)^(1/2)

Standard Deviation = 0.1306 or 13.06%

Year
Stock X
Stock Y
1
8.00%
-8.00%
2
-5.00%
20.00%
3
11.00%
4.00%
4
7.00%
11.00%
What is the standard deviation of Stock Y?
Submit
Answer format: Percentage Round to: 2
decimal places (Example: 9.24%, % sign required. Will accept
decimal format rounded to 4 decimal places (ex: 0.0924))
unanswered
not_submitted
#4
Year
Stock X
Stock Y
1
8.00%
-8.00%
2
-5.00%
20.00%
3
11.00%
4.00%
4
7.00%
11.00%
What is the covariance of the returns of Stock X...

The market price of a stock is $21.37 and it just paid a
dividend of $1.52. The required rate of return is 11.95%. What is
the expected growth rate of the dividend?
The market price of a stock is $24.04 and it is expected to pay
a dividend of $1.46 next year. The required rate of return is
11.64%. What is the expected growth rate of the dividend?
I am unclear about the differences and answers between these
two
**Answer...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 8 minutes ago

asked 46 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour 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 2 hours ago