Consider the investment in one stock asset The current purchasing price of it is $20 The bet payoff in one year is given below Market Condition Probability Dividend Price Good 0 3 $ 3 $ 23 Average 0 4 $ 1 $ 21 Bad 0 3 $ 0 $ 17 The risk free rate is 4 Market risk premium is 6 The standard deviation ...

To calculate the present value based on the certainty equivalence approach we need to determine the ...

Consider the investment in one stock asset. The current purchasing price of it is $20. The bet

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Consider the investment in one stock asset. The current purchasing price of it is $20. The bet payoff in one year is given below.

Market Condition	Probability	Dividend	Price
Good	0.3	$ 3	$ 23
Average	0.4	$ 1	$ 21
Bad	0.3	$ 0	$ 17

The risk free rate is 4%. Market risk premium is 6%. The standard deviation of holding-period returns of the market is 20%. The correlation between the bet payoff and the market portfolio is 0.6.

What's the present value based on certainty equivalence approach (answer with two decimal places)?

Related Book For answer-question

Income Tax Fundamentals 2013

ISBN: 9781285586618

31st Edition

Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill

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Posted Date: Mar 01, 2024 02:37 AM

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Consider the investment in one stock asset. The current purchasing price of it is $20. The bet

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Income Tax Fundamentals 2013

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