QUESTIONS - h & j: | ||||||
Stock A: | ||||||
State of Economy | Probability of state | Rate of return [%] if the state occurs | E[r] = p*r | d = r-E[r] | d^2 | p*d^2 |
Boom | 30.00% | 30.00 | 9.00 | 17.60 | 309.76 | 92.93 |
Normal | 40.00% | 16.00 | 6.40 | 3.60 | 12.96 | 5.18 |
Recession | 30.00% | -10.00 | -3.00 | -22.40 | 501.76 | 150.53 |
12.40 | 248.64 | |||||
Expected return | 12.40% | |||||
Variance | 248.64 | |||||
SD = 248.64^0.5 = | 15.77% | |||||
TSX: | ||||||
State of Economy | Probability of state | Rate of return [%] if the state occurs | E[r] = p*r | d = r-E[r] | d^2 | p*d^2 |
Boom | 30.00% | 18.00 | 5.40 | 11.60 | 134.56 | 40.37 |
Normal | 40.00% | 10.00 | 4.00 | 3.60 | 12.96 | 5.18 |
Recession | 30.00% | -10.00 | -3.00 | -16.40 | 268.96 | 80.69 |
6.40 | 126.24 | |||||
Expected return | 6.40% | |||||
Variance | 126.24 | |||||
SD = 126.24^0.5 = | 11.24% | |||||
Covariance/Correlation [A,TSX]: | ||||||
State | Probability of state | da*dm | da*dm*p | |||
Boom | 30.00% | 204.16 | 61.25 | |||
Normal | 40.00% | 12.96 | 5.18 | |||
Recession | 30.00% | 367.36 | 110.21 | |||
Covariance [A,TSX] | 176.64 | |||||
Correlation [A,TSX] = Covariance/[SD.A*SD.TSX] = 176.64/(15.77*11.24) = | 1.00 | |||||
Beta of Stock A = SD.A*COR[A,TSX]/SD.TSX = 15.77*1/11.24 = | 1.40 | |||||
QUESTIONS - i & k: | ||||||
Stock B: | ||||||
State of Economy | Probability of state | Rate of return [%] if the state occurs | E[r] = p*r | d = r-E[r] | d^2 | p*d^2 |
Boom | 30.00% | -9.00 | -2.70 | -17.10 | 292.41 | 87.72 |
Normal | 40.00% | 12.00 | 4.80 | 3.90 | 15.21 | 6.08 |
Recession | 30.00% | 20.00 | 6.00 | 11.90 | 141.61 | 42.48 |
8.10 | 136.29 | |||||
Expected return | 8.10% | |||||
Variance | 136.29 | |||||
SD = 136.29^0.5 = | 11.67% | |||||
TSX: | ||||||
State of Economy | Probability of state | Rate of return [%] if the state occurs | E[r] = p*r | d = r-E[r] | d^2 | p*d^2 |
Boom | 30.00% | 18.00 | 5.40 | 11.60 | 134.56 | 40.37 |
Normal | 40.00% | 10.00 | 4.00 | 3.60 | 12.96 | 5.18 |
Recession | 30.00% | -10.00 | -3.00 | -16.40 | 268.96 | 80.69 |
6.40 | 126.24 | |||||
Expected return | 6.40% | |||||
Variance | 126.24 | |||||
SD = 126.24^0.5 = | 11.24% | |||||
Covariance/Correlation [B,TSX]: | ||||||
State | Probability of state | da*dm | da*dm*p | |||
Boom | 30.00% | -198.36 | -59.51 | |||
Normal | 40.00% | 14.04 | 5.62 | |||
Recession | 30.00% | -195.16 | -58.55 | |||
Covariance [B,TSX] | -112.44 | |||||
Correlation [B,TSX] = Covariance/[SD.B*SD.TSX] = -112.44/(11.67*11.24) = | -0.86 | |||||
Beta of Stock B = SD.B*COR[B,TSX]/SD.TSX = 11.67*-0.89/11.24 = | -0.92 | |||||
QUESTION L: | ||||||
Beta of TSX is 1, as beta of stock with itself is 1. |
no excel work, show formula please You have done your research for the following investments and...
no excel work. please provide formula. You have done your research for the following investments and your friend has provided their expectations for the markets for next year. Probability of State of State of Stock Stock Economy Economy A B TSX Boom .30 30% -9% 18% Normal .40 16% 12% 10% Recession .30 -10% 20% -10% Remember to show all of your work * e. Calculate the risk for stock B. (2 marks) f. Calculate the risk for the TSX....
You have done your research for the following investments and your friend has provided their expectations for the markets for next year. Probability of State of State of Stock Stock Economy Economy A B TSX Boom .30 30% -9% 18% Normal .40 16% 12% 10% Recession .30 -10% 20% -10% * Remember to show all of your work * a. Calculate the expected return for stock A. (2 marks) b. Calculate the expected return for stock B. (2 marks) C....
e. Calculate the risk for stock B. (2 marks) f. Calculate the risk for the TSX. (2 marks) g. Calculate the covariance and correlation of the returns for stock A and stock B. (2 marks) h. Calculate the covariance and correlation of the returns for stock A and the TSX. (2 marks) e. Calculate the risk for stock B. (2 marks) f. Calculate the risk for the TSX. (2 marks) g. Calculate the covariance and correlation of the returns for...
You have done your research for the following investments and your friend has provided their expectations for the markets for next year. Probability of State of State of Stock Stock Economy Economy А B TSX Boom .30 30% -9% 18% Normal .40 16% 12% 10% Recession .30 -10% 20% -10% * Remember to show all of your work * o. You have $10,000 to invest and would like to create a portfolio that has an expected return of 15 percent....
the following investments you and your friend has provided their expectations for the markets for next year. State of Economy Probability of State of Economy Stock A Stock B TSX Boom .30 30% -9% 18% Normal .40 16% 12% 10% Recession .30 -10% 20% -10% Remember to show all of your work - make clear and understandable and CORRECT Calculate the expected return for stock A. Calculate the expected return for stock B. Calculate the expected return for...
State of Economy Probability of State of Economy Stock A Stock B TSX Boom .30 30% -9% 18% Normal .40 16% 12% 10% Recession .30 -10% 20% -10% Calculate the covariance and correlation of the returns for stock B and the TSX. Calculate the beta of Stock A. Calculate the beta of stock B. Calculate the beta for the TSX. Using an excel spreadsheet and the calculations you have done above, prepare a spreadsheet that provides the expected returns and...
State of Economy Probability of State of Economy Stock A Stock B TSX Boom .30 30% -9% 18% Normal .40 16% 12% 10% Recession .30 -10% 20% -10% Calculate the risk for stock B. Calculate the risk for the TSX. Calculate the covariance and correlation of the returns for stock A and stock B. Calculate the covariance and correlation of the returns for stock A and the TSX.
Home Work #3 Question 1 Classify the following events as mostly systematic or mostly un-systematic. Is the distinction clear in every case? a. Short term interest rates decrease expectantly. b. The interest rate a company pays on its short term debt borrowing is increased by the bank. c. Oil prices expectantly decline. d. An oil tanker runs aground creating a large oil spill. e. A major manufacturing company loses a multimillion dollar product liability suit. f. The Supreme Court of...
Please show work that is not on excel please. Thank you. CHAPTER 11 Risk and Retur 6. Calculating Expecte bleulating Expected Return. Based on the following information, calculate the expected return. State of Economy Probability of State of Economy Rate of Return If State Occurs Recession Normal Boom .15 .60 .25 -.09 .11 .30 Calculating Returns and
Show work please not on excel. CHAPTER 11 Risk and Retur 6. Calculating Expecte bleulating Expected Return. Based on the following information, calculate the expected return. State of Economy Probability of State of Economy Rate of Return If State Occurs Recession Normal Boom .15 .60 .25 -.09 .11 .30 Calculating Returns and