1.
The stock of Blue Water Tours, Inc. is expected to return 21.50percent in a boom economy, 16.50 percent in a normal economy, andlose 15.50 percent in a recessionary economy. What is the expectedrate of return on this stock if there is a 7.00 percent chance theeconomy booms, and an 83.00 percent chance the economy will benormal?
14.13 percent
13.65 percent
13.40 percent
12.48 percent
2.
A stock is expected to earn 15 percent in a boom economy and 7percent in a normal economy. There is a 35 percent chance theeconomy will boom and a 65.0 percent chance the economy will benormal. What is the standard deviation of these returns?
3.82 Percent
4.85 Percent
4.97 Percent
5.63 Percent
3.
A portfolio consists of 24 percent Stock A, 54 percent Stock B,and 22 percent Stock C. What is the portfolio expected return giventhe following:
State of Economy
Probability of State of Economy
Stock A Returns
Stock B Returns
Stock C Returns
Normal
.75
16%
9%
26%
Recession
.25
â2
19
â24
10.55 percent
11.94 percent
8.24 percent
12.47 percent
1.
The stock of Blue Water Tours, Inc. is expected to return 21.50percent in a boom economy, 16.50 percent in a normal economy, andlose 15.50 percent in a recessionary economy. What is the expectedrate of return on this stock if there is a 7.00 percent chance theeconomy booms, and an 83.00 percent chance the economy will benormal? |
14.13 percent
13.65 percent
13.40 percent
12.48 percent
2.
A stock is expected to earn 15 percent in a boom economy and 7percent in a normal economy. There is a 35 percent chance theeconomy will boom and a 65.0 percent chance the economy will benormal. What is the standard deviation of these returns? |
3.82 Percent
4.85 Percent
4.97 Percent
5.63 Percent
3.
A portfolio consists of 24 percent Stock A, 54 percent Stock B,and 22 percent Stock C. What is the portfolio expected return giventhe following: |
State of Economy | Probability of State of Economy | Stock A Returns | Stock B Returns | Stock C Returns |
Normal | .75 | 16% | 9% | 26% |
Recession | .25 | â2 | 19 | â24 |
10.55 percent
11.94 percent
8.24 percent
12.47 percent
Related questions
Part 1:
| Assume that for a 5-year period, large-company stocks had annual rates of return of 23.54 percent, -9.60 percent, -12.39 percent, -19.60 percent, and 31.39 percent. What is the variance of these returns? |
0.0533
0.0565
0.0587
0.0499
Part 2:
| A stock produced annual rates of return of 11 percent, -17 percent, 2 percent, and 14 percent over the past 4 years, respectively. What is the geometric average return for this period? |
2.50 percent
1.86 percent
1.74 percent
2.23 percent
Part 3:
| The stock of Blue Water Tours, Inc. is expected to return 14.50 percent in a boom economy, 9.50 percent in a normal economy, and lose 8.50 percent in a recessionary economy. What is the expected rate of return on this stock if there is a 5.00 percent chance the economy booms, and an 80.00 percent chance the economy will be normal? |
7.05 percent
6.80 percent
5.88 percent
7.53 percent
| Consider the following information about three stocks: |
| Rate of Return If State Occurs | ||||||||||||
| State of | Probability of | |||||||||||
| Economy | State of Economy | Stock A | Stock B | Stock C | ||||||||
| Boom | .26 | .26 | .38 | .55 | ||||||||
| Normal | .50 | .21 | .19 | .17 | ||||||||
| Bust | .24 | .05 | â.38 | â.46 | ||||||||
| a-1 | If your portfolio is invested 35 percent each in A and B and 30 percent in C, what is the portfolio expected return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Portfolio expected return | % |
| a-2 | What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.) |
| Variance |
| a-3 | What is the standard deviation? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Standard deviation | % |
| b. | If the expected T-bill rate is 4.10 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Expected risk premium | % |
| c-1 | If the expected inflation rate is 3.70 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Approximate expected real return | % |
| Exact expected real return | % |
| c-2 | What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Approximate expected real risk premium | % |
| Exact expected real risk premium | % |
