ZuoTi.Pro
Question

Question 5 (2 points) What is the risk premium for the following returns if the risk-free rate is 5%? State Boom Good Recessi
business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1
Expected return = (60%*0.15)+(20%*0.50)+(-10%*0.25)+(-30%*0.10) = 13.50%
Risk premium = Expected return-Risk free rate = 13.50%-5.00% = 8.50%
0 0
Add a comment
Know the answer?
Add Answer to:
Question 5 (2 points) What is the risk premium for the following returns if the risk-free...
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

  • calculate the expected return and standard deviation (with details, please) TABLE 8.5 Returns of Zig, Peat,...

    calculate the expected return and standard deviation (with details, please) TABLE 8.5 Returns of Zig, Peat, and 50-50 Portfolio of Zig and Peat State of Economy Boom Probability of State Retum of Zig Company 40% Return of Peat Company Return of Portfolio 31.0% 0.20 22% Steady 12% 15% 0.50 0.30 13.5% -4.5% Recession 5% Eln) 12.5% 10.7% 11.6%

  • 6. Calculating Expected Return Based on the following information, calculate the expected return.

    6. Calculating Expected Return Based on the following information, calculate the expected return. State of EconomyProbability of State of EconomyRate of Return if State OccursRecession.15-.12Normal.60.10Boom.25.277. Calculating Returns and Standard Deviations Based on the following information, calculate the expected returns and standard deviations for the two stocks. State of EconomyProbability of State of EconomyRate of Return if State OccursStock AStock BRecession.10.02-.30Normal.50.10.18Boom.40.15.3110. Returns and Standard Deviations Consider the following information: State of EconomyProbability of State of EconomyRate of Return if State OccursStock AStock BStock CBoom.15.33.45.33Good.55.11.10.17Poor.20.02.02-.05Bust.10-.12-.25-.09a. Your...

  • CHAPTER 11 Risk and Retur 6. Calculating Expecte bleulating Expected Return. Based on the following information,...

    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

  • Table 1            Estimated Total Returns   &...

    Table 1            Estimated Total Returns                                                                                                  State of the Economy Probability T-Bond SETX Golden S&P 500 Recession 5% 5% -19% 20% -14% Below Average 15% 5% 2% 13% 3% Average 45% 5% 9% 10% 11% Above Average 25% 5% 34% 5% 22% Boom 10% 5% 25% -5% 33% Golden's AA-Rated bonds yield 5.95%. What is the required return on Golden's stock using the bond risk premium method? (Assume 6% premium)

  • Table 1            Estimated Total Returns                          &n

    Table 1            Estimated Total Returns                                                                                                  State of the Economy Probability T-Bond SETX Golden S&P 500 Recession 5% 5% -19% 20% -14% Below Average 15% 5% 2% 13% 3% Average 45% 5% 9% 10% 11% Above Average 25% 5% 34% 5% 22% Boom 10% 5% 25% -5% 33% SETX's A-Rated bonds yield 7.35%. What is the required return on SETX's stock using the bond risk premium method? (Assume 6% premium)

  • Table 1            Estimated Total Returns                          &n

    Table 1            Estimated Total Returns                                                                                                  State of the Economy Probability T-Bond SETX Golden S&P 500 Recession 5% 5% -19% 20% -14% Below Average 15% 5% 2% 13% 3% Average 45% 5% 9% 10% 11% Above Average 25% 5% 34% 5% 22% Boom 10% 5% 25% -5% 33% Why is the T-bond return in table 1 shown to be independent of the state of the economy? Is the return on a 1-year T-bond risk-free?

  • Stock A has the following returns for various states of the economy: State of Economy Probability...

    Stock A has the following returns for various states of the economy: State of Economy Probability Stock A's Return Recession 5% -50% Below average 25% -3% Average 35% 10% Above average 20% 20% Boom 15% 45% Stock A's expected return is _________    11%    22%    4.4%    9.75%

  • Outcome Probability Return Boom 60% 0.26 Normal 25% 0.19 Recession 10% 0.14 Depression 5% 0.10 What...

    Outcome Probability Return Boom 60% 0.26 Normal 25% 0.19 Recession 10% 0.14 Depression 5% 0.10 What is the variance of this asset's returns?

  • Show work please not on excel. CHAPTER 11 Risk and Retur 6. Calculating Expecte bleulating Expected...

    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

  • Please show work that is not on excel please. Thank you. CHAPTER 11 Risk and Retur...

    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

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