Question
An analyst has developed the following probability distribution for the rate of return for a common...
An analyst has developed the following probability distribution for the rate of return for a common stock.
| Scenario | Probability | Rate of Return |
| 1 | 0.30 | -5% |
| 2 | 0.45 | 0% |
| 3 | 0.25 | 10% |
For these questions use the percentage values for your calculations (for example 10% not 0.10). Enter your response as a percentage rounded to 2 decimal places.
a. Calculate the expected rate of return.
Expected Rate of Return = %
b. Calculate the variance of the return.
Variance = %2
c. Calculate the standard deviation of the return.
Standard Deviation = %
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Answer #1
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Question 25 An analyst developed the following probability distribution of the rate of return for a...
Question 25
An analyst developed
the following probability distribution of the rate of return for a
common stock:
Scenario
Probability
Rate of return
Recession
0.20
-0.05
Normal
0.60
0.10
Boom
0.20
0.25
The standard
deviation of the rate of return is closest to:
1.
0.0849
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0.0949
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Scenario
Probability
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1
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2
0.39
7
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3
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27
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a. Calculate the expected rate of return.
(Round intermediate calculations to at least 4 decimal
places. Round your answer to 2 decimal places.)
b. Calculate the variance and the standard
deviation of this probability distribution. (Use the
percentage values for your calculations (for example 10% not 0.10).
Round intermediate calculations to at least 4 decimal places. Enter
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Normal growth
0.40
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4%
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3%
b.
Calculate the values of expected return and variance for the
stock fund. (Do not round intermediate calculations. Enter...
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Consider the following information: Rate of Return if State
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percent in B. What is the expected return of the portfolio? (Do not
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Consider the following information:
Rate of Return If State Occurs
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State of
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Stock A
Stock B
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.04
–.17
Normal
.30
.10
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Boom
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.15
.37
a.
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not round intermediate calculations. Enter your answers as a
percent rounded to 2 decimal places. Omit the "%" sign in your
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A
%
Expected return for
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b.
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portfolio is invested 25 percent each in A and C and 50 percent in
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Consider the following scenario analysis: Rate of Return
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An analyst has constructed the following probability distribution for firm X's predicted return for the upcoming...
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distribution for firm X's predicted return for the upcoming
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-5
0.24
-8
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10
0.15
12
0.11
-2
0.2
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answer with 2 decimal places)
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0.20
0.19
0.46
0.32
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0.40
0.12
0.19
0.14
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0.04
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–0.05
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0.25
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0.20
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0.09
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0.40
–0.03
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