Question

Investor's Sentiment Negative 15.00% 5.00% Neutral 21.00% 8.00% Positive 64.00% 17.00% Using the stock information presented above, determine the expected return, the standard deviation of returns, and the covariance for each investor's sentiment. 12.18 % expected return equation, 4.0% standard deviations of returns, 5.14 Covar_Negative, 1.80 Covar_Neutral, and .40 Covar_Positive 11.30 % expected return equation, 5.0% standard deviations of returns, 6.02 Covar_Negative, 1.00 Covar_Neutral, and 1.80 Covar_Positive 13.31% expected return equation, 5.0% standard deviations of returns, 6.67 Covar_Negative, 2.98 Covar_Neutral, and .46 Covar_Positive 10 veetadrot tier 2007

Answer 1

In the first answer:

Calculation of expected return:

Formula-

R1P1+R2P2+R3P3......RnPn

R=Return Expectation in the given scenario.

P=Probability of the return being achieved in the given scenario.

Ans-

.15(5%)+.21(8%)+.64(17%)

=.75+1.68+10.88

=13.31

Calculation of standard deviation:

n ∑ ​ (x− x ˉ ) 2 ​

x ˉ=13.31

x=Return Expectation in the given scenario.

n=Number of scenario

Scenario (x− x ˉ ) 2   

Negative 69.0561

Neutral 28.1961

Positive 13.6161

TOTAL 111.3732

n ∑ ​ Ix− x ˉ I 2 ​

=5%

Covariance of each Scenario:

Negative:-6.67

Neutral:-2.98

Positive:-.46

Ans of Second Question:

Calculation of expected return:

Formula-

R1P1+R2P2+R3P3......RnPn

R=Return Expectation in the given scenario.

P=Probability of the return being achieved in the given scenario.

Ans-

=.21(8%)+.64(17%)

=1.68+10.88

=12.56

Calculation of standard deviation:

n ∑ ​ (x− x ˉ ) 2 ​

x ˉ=12.56

x=Return Expectation in the given scenario.

n=Number of scenario

Scenario (x− x ˉ ) 2   

Neutral 20.7936

Positive 19.7136

TOTAL 40.5072

n ∑ ​ Ix− x ˉ I 2 ​

=4.5%