State of Economy | Probability of Economy(X) | Stock | Bonds |
recession | 0.2 | -5.00% | 14.00% |
normal | 0.6 | 15.00% | 8% |
boom | 0.2 | 25% | 4.00% |
Expected return E(X)=sum of(x*P(X)) |
13.00% | 8.40% | |
E(X^2) | 0.0265 | 0.00808 | |
Variance=E(X^2)-E(X)^2 |
0.0096 | 0.001024 | |
Standard deviation=sqrt(Variance) |
9.80% | 3.20% | |
coefficient of variation = std/expected return |
0.75 | 0.38 |
10. Consider the following scenario analysis Scenario Recession Normal economy Boom Probability 0.20 0.60 0.20 Rate...
Consider the following scenario analysis: Scenario Recession Normal economy Boom Rate of Return Probability Stocks Bonds 0.20 -5% 14% 0.60 158 0.20 1 25 4 a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? • Yes No b. Calculate the expected rate of return and standard deviation for each investment. (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.) Expected Rate of Return Standard...
Consider the following scenario analysis: Rate of ReturnScenarioProbabilityStocksBondsRecession0.20-5%14% Normal economy 0.60158Boom0.20 254Assume a portfolio with weights of .60 in stocks and .40 in bonds. a. What is the rate of return on the portfolio in each scenario? (Do not round percent rounded to 1 decimal place.) Rate of Return Recession Normal economy Boomb. What are the expected rate of return and standard deviation of the portfolio? (Do not round intermediate calculations. Enter your answer as...
Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession 0.20 –6 % 18 % Normal economy 0.50 19 11 Boom 0.30 26 8 a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? b. Calculate the expected rate of return and standard deviation for each investment. Expected Rate of Return Standard Deviation Stocks ? ? Bonds ? ?
Consider the following scenario analysis: Rate of Return ProbabilityStocks Bonds -6% Scenario Recession 17% 0.20 Normal economy 0.50 20 Boom 0.30 29 6 a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? O No O Yes b. Calculate the expected rate of return and standard deviation for each investment. (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.) Expected Rate of Return Standard Deviation...
Consider the following information: Rate of Return if State Occurs State of Economy Recession Normal Boom Probability of State of Economy 0.20 0.60 0.20 Stock A 0.03 0.09 0.14 Stock B -0.19 0.17 0.33 Required: (a) Calculate the expected return for Stock A. (Do not round your intermediate calculations.) 9.15% (b) Calculate the expected return for Stock B. (Do not round your intermediate calculations.) ( (Click to select) ) (c) Calculate the standard deviation for Stock A. (Do not round...
Consider the following information: State of Economy Recession Normal Boom Rate of Return if State Occurs Probability of State of Economy Stock A Stock B 0.30 0.96 -0.20 0.55 0.15 0.15 0.15 0.18 0.35 a. Calculate the expected return for the two stocks. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Expected return for A Expected return for B b. Calculate the standard deviation for the two stocks. (Do not round your...
Consider the following information: Rate of Return if State Occurs State of Economy Recession Normal Boom Probability of State of Economy 0.20 0.60 0.20 Stock A 0.04 0.07 0.11 Stock B -0.21 0.15 0.32 Required: (a) Calculate the expected return for Stock A. (Do not round your intermediate calculations.) ( (Click to select) (b) Calculate the expected return for Stock B. (Do not round your intermediate calculations.) (Click to select) A (c) Calculate the standard deviation for Stock A. (Do...
Consider the following information: Rate of Return if State Occurs 39 State of Economy Recession Normal Boom Probability of State of Economy 0.20 0.60 0.20 Stock A 0.05 0.09 0.14 Stock B -0.18 0.16 0.32 Required: Given that the expected return for Stock A is 9.200%, calculate the standard deviation for Stock A. (Do not round your intermediate calculations.) (Click to select)
1. Assume that there are two assets and three state of economy as followState Of EconomyProbability Of State Of EconomyRate Of Return If State OccursAsset AAsset BRecession 0.20-0.150.20Normal 0.500.200.30Boom 0.300.600.40Assume further that Br. 15,000 invested in asset A and Br. 5,000 invested in asset B. Based on this information, answer the following questions.a) Compute expected returns and standard deviation of the portfolio à5Marks b) Compute covariance of the assets (CovAB) à2Marks c) If the assets...
< 087c3bf05caf46f2ae409104186c6b97.xlsx 6 Q No.3 Economy Recession Normal Good Boom Probability 20% 35% 35% 10% Stocks -5% 10% 14% 18% Bonds 15% 12% 11% 9% Part A 1. Calculate expected return and standard deviation of each stock and bonds. 2. Which investment is less risky based on standard deviation? Part B (part B will be solved separately from part A. You can only take data from question number 3 and make portfolio. In case of any problem recheck zoom recording...