Homework Answers
Expected Rate of Stock A = 0.10(-0.10) + 0.20(0.02) + 0.40(0.12) + 0.20(0.20) + 0.10(0.38)
Expected Rate of Stock A = 12.00%
Expected Rate of Stock B = 0.10(-0.35) + 0.20(0) + 0.40(0.20) + 0.20(0.25) + 0.10(0.45)
Expected Rate of Stock B = 14.00%
As Stock B has higher expected rate of return one would select stock B.
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(4) Given the following table of a probability distribution of two stocks' rate of return, which...
Given the probability distribution below, calculate the expected rate of return for stock A and stock...
Given the probability distribution below, calculate the expected rate of return for stock A and stock B Rate of return (%) Probability Stock A Stock B 0.1 10 35 0.2 2 0 0.4 12 20 0.2 20 25 0.1 38 45 Stock A = 14%; Stock B = 21% Stock A = 23% ; Stock B = 12% Stock A = 25%; Stock B = 15% Stock A =31% ; Stock B = 27%
8-6 EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns:...
8-6 EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability B 0.1 0.2 A (10%) 2 12 20 38 (35%) 0 20 0.4 0.2 0.1 45 a. Calculate the expected rate of return, fe, for Stock B (f = 12%). b. Calculate the standard deviation of expected returns, o , for Stock A (o, = 20.35%). Now calculate the coefficient of variation for Stock B. Is it possible that most investors will regard...
The probability of distribution of returns for two stocks A and B is given in the...
The probability of distribution of returns for two stocks A and B is given in the following table. Scenario Probability return of stock A Return of Stock B Good .25 -.02 .08 Normal .35 .05 .01 Bad .4 .05 -.1 Expected return of stock A is ________ and that of stock B is __________ a. 2.16%, 0.45% b. 3.25%, 1% c. 2.16%, -1.24% d. 3.25%, -1.65%
Two stocks under evaluation have the following probability distribution for their rate of returns. Probability 30%...
Two stocks under evaluation have the following probability distribution for their rate of returns. Probability 30% 20% 50% Rate of Return Stock A Stock B 18% 10% -2% 5% 10% 0% Table Q1 (a) Explain the expected return for each of the stocks by giving the value. (3 marks) (b) Explain the standard deviation for the return of each of the stocks by giving the value. (6 marks) (c) Explain the correlation coefficient between the returns of the two stocks...
Stocks X and Y have the following probability distributions of expected future returns: Probability 0.1 0.2...
Stocks X and Y have the following probability distributions of expected future returns: Probability 0.1 0.2 0.4 0.2 0.1 (10%) 2 12 20 48 (35%) 0 20 25 What are the expected returns of both X and Y? O 12% and 15% 13% and 14% 13% and 16% 13% and 15% 12% and 14%
letter b please You have estimated the following probability distribution of returns for two stocks: Stock...
letter b please
You have estimated the following probability distribution of returns for two stocks: Stock N Stock O Probability 0.20 0.30 Return 8% Probability 0.20 0.30 0.30 Return 26% 12 0.30 0.20 -4 0.20 -4 Calculate the expected rate of return and standard deviation for cach stock If the correlation between the returns on the two stocks is -0.40, calculate the portfolio returm and the standard deviation for portfolios containing 100%, 75 % , 50 % , 25 %...
Consider the following table, which gives a security analyst's expected return on two stocks for two particular market...
Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Aggressive Stock Market Return Defensive Stock 5% -2% 6% 25 38 12 a. What are the betas of the two stocks? b. What is the expected rate of return on each stock if the market return is equally likely to be 5% or 25% c. If the T-bill rate is 6% and the market return is equally likely to be 5%...
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (13 %) (37 %) 0.1 6 0 0.5 10 18 0.2 22 28 0.1 38 35 A.Calculate the expected rate of return,rb , for Stock B (rA = 12.50%.) Do not round intermediate calculations. Round your answer to two decimal places. B. Calculate the standard deviation of expected returns, σA, for Stock A (σB = 19.26%.) Do not round intermediate calculations. Round your...
5. Given below are the probability distribution of two assets-X and Y States of Economy Probability...
5. Given below are the probability distribution of two assets-X and Y States of Economy Probability MEGA BOOM BOOM NORMAL BUST MEGA BUST 0.1 0.2 0.4 Expected returns of the 2 assets (%) - X Y 50 100 40 70 30 50 10 -20 -10 -50 0.2 0.1 Which one has higher stand-alone risk? (Compute Coefficient of Variation]
PLEASE SHOW EXPLANATION, WORK, AND EQUATIONS 6. Stock A has the following probability distribution of expected...
PLEASE SHOW EXPLANATION, WORK, AND EQUATIONS
6. Stock A has the following probability distribution of expected returns. What is Stock A's expected rate of return and standard deviation? Probability Rate of Return -12% 0.1 0.2 0.4 0.2 0.1 0 5 8 22
8-6 EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability B 0.1 0.2 A (10%) 2 12 20 38 (35%) 0 20 0.4 0.2 0.1 45 a. Calculate the expected rate of return, fe, for Stock B (f = 12%). b. Calculate the standard deviation of expected returns, o , for Stock A (o, = 20.35%). Now calculate the coefficient of variation for Stock B. Is it possible that most investors will regard...
Two stocks under evaluation have the following probability distribution for their rate of returns. Probability 30% 20% 50% Rate of Return Stock A Stock B 18% 10% -2% 5% 10% 0% Table Q1 (a) Explain the expected return for each of the stocks by giving the value. (3 marks) (b) Explain the standard deviation for the return of each of the stocks by giving the value. (6 marks) (c) Explain the correlation coefficient between the returns of the two stocks...
Stocks X and Y have the following probability distributions of expected future returns: Probability 0.1 0.2 0.4 0.2 0.1 (10%) 2 12 20 48 (35%) 0 20 25 What are the expected returns of both X and Y? O 12% and 15% 13% and 14% 13% and 16% 13% and 15% 12% and 14%
letter b please
You have estimated the following probability distribution of returns for two stocks: Stock N Stock O Probability 0.20 0.30 Return 8% Probability 0.20 0.30 0.30 Return 26% 12 0.30 0.20 -4 0.20 -4 Calculate the expected rate of return and standard deviation for cach stock If the correlation between the returns on the two stocks is -0.40, calculate the portfolio returm and the standard deviation for portfolios containing 100%, 75 % , 50 % , 25 %...
Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Aggressive Stock Market Return Defensive Stock 5% -2% 6% 25 38 12 a. What are the betas of the two stocks? b. What is the expected rate of return on each stock if the market return is equally likely to be 5% or 25% c. If the T-bill rate is 6% and the market return is equally likely to be 5%...
5. Given below are the probability distribution of two assets-X and Y States of Economy Probability MEGA BOOM BOOM NORMAL BUST MEGA BUST 0.1 0.2 0.4 Expected returns of the 2 assets (%) - X Y 50 100 40 70 30 50 10 -20 -10 -50 0.2 0.1 Which one has higher stand-alone risk? (Compute Coefficient of Variation]
PLEASE SHOW EXPLANATION, WORK, AND EQUATIONS
6. Stock A has the following probability distribution of expected returns. What is Stock A's expected rate of return and standard deviation? Probability Rate of Return -12% 0.1 0.2 0.4 0.2 0.1 0 5 8 22
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