ZuoTi.Pro
Question

A certain company pays dividends based on the overall state of the economy. You think that...

A certain company pays dividends based on the overall state of the economy. You think that the economy has three possible states: boom, level, and slump. If the economy is booming, you will receive a $10 dividend. A normal economy will result in a $5 dividend, and a slumping economy will only pay a $2 dividend.

Assuming that each state of the economy has a one in three chance of occurring, what is the expected value of your dividend?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1
state of economy probability dividend probability * dividend
boom 1/3 10 1/3*10 =>3.3333
normal 1/3 5 1/3*5=>1.6667
slump 1/3 2 1/3*2=.0.6667
expected dividend $5.67
0 0
Add a comment
Know the answer?
Add Answer to:
A certain company pays dividends based on the overall state of the economy. You think that...
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. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • A certain company pays dividends based on the overall state of the economy. You think that...

    A certain company pays dividends based on the overall state of the economy. You think that the economy has three possible states: boom, level, and slump. If the economy is booming, you will receive a $10 dividend. A normal economy will result in a $5 dividend, and a slumping economy will only pay a $2 dividend. Assuming that each state of the economy has a one in three chance of occurring, what is the expected value of your dividend? Select...

  • A certain company pays dividends based on the overall state of the economy. You think that...

    A certain company pays dividends based on the overall state of the economy. You think that the economy has three possible states: boom, level, and slump. If the economy is booming, you will receive a $10 dividend. A normal economy will result in a $5 dividend, and a slumping economy will only pay a $2 dividend. Assuming that each state of the economy has a one in three chance of occurring, what is the expected value of your dividend? Select...

  • A certain company pays dividends based on the overall state of the economy. You think that...

    A certain company pays dividends based on the overall state of the economy. You think that the economy has three possible states boom, level and slump. If the economy is booming. you will receive a $10 dividend. A normal economy will result in a 35 dividend, and a slumping economy will only pay a $2 dividend. Assuming that each state of the economy has a one in three chance of occurring, what is the expected value of your dividend? Select...

  • You own a portfolio with the following expected returns given the various states of the economy....

    You own a portfolio with the following expected returns given the various states of the economy. What is the overall portfolio expected return? A. 6.3%; B.6.8% ; C. 7.6% ; D. 10.0% ; E. 10.8% State of Economy Boom Normal Recession Probability of State of Economy 15% 60% 25% Rate of Return if State Occurs 18% 11% -10%

  • Today you buy 1 share of ABC Inc. at $100 per share. A year from now...

    Today you buy 1 share of ABC Inc. at $100 per share. A year from now ABC will pay a dividend of $3 per share for sure. The price of ABC a year from now is uncertain and depends on the state of the economy. A year from now the economy will either be in a recession, a state of “normal" growth, or a boom with probabilities of 30%, 40%, and 30% respectively. After analyzing ABC you determine that the...

  • Please Show Work 0. Today you bought 100 shares of ABC Inc. at S100 per share....

    Please Show Work 0. Today you bought 100 shares of ABC Inc. at S100 per share. A year from now ABC will pay a dividend of $2 per share for sure. The price of ABC a year from now is uncertain and depends on the state of the economy. A year from now the economy will either be in a recession, a state of "normal" growth, or a boom with probabilities of 30%, 40%, and 30% respectively. After analyzing ABC...

  • Caliber Corp. currently pays no dividends because it requires its internally generated funds to be used...

    Caliber Corp. currently pays no dividends because it requires its internally generated funds to be used to fund a research intensive project over the next three years. The project is expected to be completed after this time and by the end of the fourth year, the company will pay its first dividend of $2.00. The dividends will be expected to grow at the rate of 20% over the following five years. After this time period, dividends will grow at the...

  • Suppose you observe the following situation: Return if State Occurs Probability of State State of Economy...

    Suppose you observe the following situation: Return if State Occurs Probability of State State of Economy Boom Normal Bust Stock A -08 Stock B -.05 14 29 Skipped 13 15 48 a. Calculate the expected return on each stock. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Assuming the capital asset pricing model holds and Stock A's beta is greater than Stock B's beta by 25, what is...

  • Suppose you observe the following situation: Return if State Occurs Probability of State State of Economy...

    Suppose you observe the following situation: Return if State Occurs Probability of State State of Economy Boom Normal Bust Stock A -.06 .15 .52 Stock B -07 .19 .74 .16 07 .33 a. Calculate the expected return on each stock. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Assuming the capital asset pricing model holds and Stock A's beta is greater than Stock B's beta by 13, what...

  • 1 - The return on shares of Valley Transporter is predicted under the following various economic...

    1 - The return on shares of Valley Transporter is predicted under the following various economic conditions: Recession -0.12 Normal +0.06 Boom +0.24 If each economy state has the same probability of occurring, what is the variance of the stock? Place your answer in decimal form using four decimal places. 2. The return on shares of the Orange Company are predicted under the following states of nature. The states of nature are all equally likely, and because there are a...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT