The return for Target stock next year will depend on the state of the economy. The...
The return for Target stock next year will depend on the state of the economy. The economy may be bad, good, or great. You will find the probabilities associated with each state of the economy and the corresponding returns in the table below. What is the expected return on Target stock?
| Economy | Probability | Return |
| Bad | 30% | -12.40% |
| Good | 55% | 8.30% |
| Great | 15% | 17.10% |
| A. |
8.30% |
|
| B. |
6.41% |
|
| C. |
3.41% |
|
| D. |
4.33% |
Homework Answers
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The return for Target stock next year will depend on the state
of the economy. The...
Rate of Return if State Occurs Stock State of Economy Probability of State of Economy Stock...
Rate of Return if State Occurs Stock State of Economy Probability of State of Economy Stock A Stock B Boom 45% 0.18 0.40 0.22 Bust 55% -0.06 -0.30 -0.05 Asset Weights 25% 30% 45% What is the expected return of this portfolio?
Probability of State of Economy State of Economy Return of Stock A Return of Stock B...
Probability of State of Economy State of Economy Return of Stock A Return of Stock B 0.20 Bear 0.05 -0.05 0.40 Normal 0.07 0.10 0.40 Bull 0.10 0.20 A) Calculate the expected return for each stock. B) What is the correlation between the returns of the two stocks? C) Assume the market has an expected return of 10% and a standard deviation of 20%. Also, ρB,M = 0.8. Calculate Beta for Stock B.
(10%) Question 2: The ABC stock return and the XYZ stock return depend on the state...
(10%) Question 2: The ABC stock return and the XYZ stock return depend on the state of economy: State of the economy Probability of the state 0.20 0.35 0.45 ABC stock return -0.10 -0.05 0.00 XYZ stock return -0.05 0.00 0.00 What is the correlation between the ABC stock return and the XYZ stock return? a) 0.0625 b) 0.815 c) 1.0 d) 0.0 e) 0.521
The Korean stock market this year can be extremely bad, bad, good, or extremely good. The...
The Korean stock market this year can be extremely bad, bad, good, or extremely good. The following table shows the probabilities and the stock returns corresponding to the four states of the market. What is the expected return of KOSPI this year? Extremely Bad Bad Good Extremely good Probability .05 0.35 .45 .15 KOSPI -20% -4% 12% 30% 1) 5.5% 2) 6.5% 3) 7.5% 4) 8.5% 5) 9.5%
1. Expected return and standard deviation Aa Aa Wilson holds a two-stock portfolio that invests equally...
1. Expected return and standard deviation Aa Aa Wilson holds a two-stock portfolio that invests equally in Kelevra Industries and Old Glory Insurance Company (50% of his portfolio is in each stock). Each stock's expected return for the next year will depend on market conditions. The stocks' expected returns if there are poor, average, or great market conditions are shown below State of Probability of Kelevra Old Glory Economy State of Economy Industries Insurance Co Poor Average Great 0.25 0.50...
3. Calculate the probability-weighted expected return and standard deviation for the stock below State of the...
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Rate of Return If State Occurs State of Probability of State of Economy Economy Stock A Stock B Stock C .55 .06 14 Boom Bust .45 .34 -.07 10 .02 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the variance of a portfolio invested 22 percent each in A and B...
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Rate of Return if State Occurs State of Economy State of Economy Stock A Stock B Stock C Boom Probability of 0.18 0.11 0.48 0.18 -0.09 0.32 0.33 0.15 0.10 0.30 0.40 Good -0.05 -0.09 0.05 -0.03 Poor 0.20 Bust a. Your portfolio is invested 25 percent each in A and C and 50 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal...
An analyst thinks that next year there is a 70% chance that the world economy will...
An analyst thinks that next year there is a 70% chance that the
world economy will be good, a 20% chance that it will be neutral,
and a 10% chance that it will be poor. She also predicts
probabilities that the performance of a start-up firm, Creative
Ideas, will be good, neutral, or poor for each of the economic
states of the world economy. The following table presents
probabilities for three states of the world economy and the
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Rate of Return if State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom 0.10 0.18 0.48 0.33 Good 0.30 0.11 0.18 0.15 Poor 0.40 0.05 -0.09 -0.05 Bust 0.20 -0.03 -0.32 -0.09 a. Your portfolio is invested 25 percent each in A and C and 50 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal...
Rate of Return if State Occurs Stock State of Economy Probability of State of Economy Stock A Stock B Boom 45% 0.18 0.40 0.22 Bust 55% -0.06 -0.30 -0.05 Asset Weights 25% 30% 45% What is the expected return of this portfolio?
(10%) Question 2: The ABC stock return and the XYZ stock return depend on the state of economy: State of the economy Probability of the state 0.20 0.35 0.45 ABC stock return -0.10 -0.05 0.00 XYZ stock return -0.05 0.00 0.00 What is the correlation between the ABC stock return and the XYZ stock return? a) 0.0625 b) 0.815 c) 1.0 d) 0.0 e) 0.521
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3. Calculate the probability-weighted expected return and standard deviation for the stock below State of the Economy Good Bad Ugly Probability 0.7 0.2 0.1 Expected Return on Stock 20% 5% -10%
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Rate of Return if State Occurs State of Economy State of Economy Stock A Stock B Stock C Boom Probability of 0.18 0.11 0.48 0.18 -0.09 0.32 0.33 0.15 0.10 0.30 0.40 Good -0.05 -0.09 0.05 -0.03 Poor 0.20 Bust a. Your portfolio is invested 25 percent each in A and C and 50 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal...
An analyst thinks that next year there is a 70% chance that the
world economy will be good, a 20% chance that it will be neutral,
and a 10% chance that it will be poor. She also predicts
probabilities that the performance of a start-up firm, Creative
Ideas, will be good, neutral, or poor for each of the economic
states of the world economy. The following table presents
probabilities for three states of the world economy and the
corresponding conditional...
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