Following are four economic states, their likelihoods, and the potential returns: Economic State Fast growth Slow...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Following are four economic states, their likelihoods, and the potential returns: Economic State Fast growth Slow growth Recession Depression Probability 0.23 0.50 0.23 0.04 Expected return Standard deviation Compute the expected return and standard deviation. (Do not round intermediate calculations and round your answers to 2 decimal places.) Return 76% 21 -20 -55 % % Problem 10-27 Portfolio Beta and Required Return (LG10-3) You hold the positions in the table below. Price $38.00 Portfolio beta Amazon.com Family Dollar Stores McKesson Corp. Schering-Plough Corp. What is the beta of your portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places.) 25.00 36.00 34.00 Shares 165 230 92 231 % Beta 4.23 1.40 0.75 0.31 Problem 10-5 Risk Premium (LG10-2) The average annual return on the S&P 500 Index from 1986 to 1995 was 13.60 percent. The average annual T-bill yield during the same period was 5.20 percent. What was the market risk premium during these ten years? (Round your answer to 2 decimal places.) Average market risk premium % Following are four economic states, their likelihoods, and the potential returns: Economic State Fast growth Slow growth Recession Depression Probability 0.23 0.50 0.23 0.04 Expected return Standard deviation Compute the expected return and standard deviation. (Do not round intermediate calculations and round your answers to 2 decimal places.) Return 76% 21 -20 -55 % % Problem 10-27 Portfolio Beta and Required Return (LG10-3) You hold the positions in the table below. Price $38.00 Portfolio beta Amazon.com Family Dollar Stores McKesson Corp. Schering-Plough Corp. What is the beta of your portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places.) 25.00 36.00 34.00 Shares 165 230 92 231 % Beta 4.23 1.40 0.75 0.31 Problem 10-5 Risk Premium (LG10-2) The average annual return on the S&P 500 Index from 1986 to 1995 was 13.60 percent. The average annual T-bill yield during the same period was 5.20 percent. What was the market risk premium during these ten years? (Round your answer to 2 decimal places.) Average market risk premium %
Expert Answer:
Answer rating: 100% (QA)
1 Calculate the expected return and standard deviation Calculate the expected return mean return first Expected Return Probability of Fast Growth Retu... View the full answer
Related Book For
Finance Applications and Theory
ISBN: 978-0077861681
3rd edition
Authors: Marcia Cornett, Troy Adair
Posted Date:
Students also viewed these finance questions
-
1). There are three securities in the market. The following chart shows their possible payoffs: State - Probability of Outcome -Return on Security 1 - Return on Security 2 - Return on Security 3 1...
-
You are given the following information: State of Economy Return on Stock A Return on Stock B Bear .103 .046 Normal .114 .149 Bull .074 .234 Assume each state of the economy is equally likely to...
-
What volume of 0.2 M AGNO3 is required to react exactly with 120.0 mL of 0.3 M Na SO4 solution? Hint: You will want to write a balanced reaction. 180mL 90mL O345 ml 360mL O 36mL
-
Consider a model of random interest rates R; between year i and i+1. The R, are i.i.d. random variables such that 1+ R; is LogNormal (0.03,0.0010) distributed. Suppose you deposit an amount of 4000...
-
One from of mass spectrometer accelerates ions by a voltage V before they enter a magnetic field B. the ions are assumed to start from set, show that the mass of an ion is m =qB2R2/2V, where R is the...
-
The fixture clamp consists of a square-threaded screw having a coefficient of static friction s mean diameter d, and a lead h. The five points indicated are pin connections. Determine the clamping...
-
The balance sheet of The Miller Corporation disclosed a long-term investment inthe common shares of The Mann Corporation valued at \($350,000\) as of December 31, 2015. The investment had been...
-
You have prepared the following schedule for a project in which the key resources is a tractor. There are three tractors available to the project. Activities A and D require one tractor to complete...
-
Which two classifications of product costs do managers use to determine efficiency in their manufacturing processes? Variable Costs and Fixed Costs Periodic Costs and Constant Costs Prime Costs and...
-
A CCPC disposes of a building used for business operations with capital cost of $1 million and UCC of $400,000, for $1.25 million. Given this information only, indicate the dollar changes to the...
-
Problem : Conditional probabilities, total probability theorem, forecasting stock returns
-
Describe the International Monetary Fund. How do the Foreign Exchange Market and the International Monetary System relate and interact? Provide examples.
-
Suppose the target range for the federal funds rate is 1.5 to 2.0 percent but that the equilibrium federal funds rate is currently 1.70 percent. Assume that the equilibrium federal funds rate falls...
-
1. Do you believe that Porshe's management is appropriately concerned with shareholder wealth? Does Porsche's ownership structure work to the benefit or detriment of public shareholders?
-
Analyse effective leadership strategies for enhancing performance in public enterprises. Use practical examples from the Namibian corporate sector to illustrate your answers.
-
Cash includes currency and coins, balances in checking accounts, and items acceptable for deposit in these accounts, such as checks and money orders received from customers. These forms of cash...
-
Select any processing method and discuss how you would use it to prepare 50-nm thin films of poly(fluorene)s for light emitting diodes. Select any processing method and discuss how you would use it...
-
You are planning to purchase your first home five years from today. The required down payment will be $50,000. You currently have $20,000. but you plan to contribute $500 each quarter to a special...
-
A 2-year Treasury security currently earns 1.94 percent. Over the next two years, the real risk free rate is expected to be 1.00 percent per year and the inflation premium is expected to be 0.50...
-
Assume the current interest rate on a 1-year Treasury bond (1R1) is 4.50 percent, the current rate on a 2-year Treasury bond (1R2) is 5.25 percent, and the current rate on a 3-year Treasury bond...
-
When you go on the Web to find a firms beta, you do not know how recently it was computed, what index was used as a proxy for the market portfolio, or which time series of returns the calculations...
-
Which manager uses a transformational leadership style to motivate employees? A. Dick, who works daily to get the task done and gives to do lists to employees. B. Martin, who is known for seeing that...
-
Think of a manager for whom you have worked. What did the manager do to promote job satisfaction among the employees in the organization?
-
Identify a nursing unit where you know good patient care is given. Discuss what factors in the environment promote the delivery of high-quality patient care. Pay particular attention to how the...
Study smarter with the SolutionInn App