You have been given the price at t =O (PO) and probability distribution for the price...
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You have been given the price at t =O (PO) and probability distribution for the price at t =1 (P1) for three stocks: (20%) Stock A Stock B Stock C 55 30 45 PO 70 50 55 Boom (30%) a. What is the expected holding-period return for each stock? b. What is the expected standard deviation for each stock? d. Which stock will you choose to hold? Normal (50%) 60 35 50 c. Suppose the risk-free rate of return is 2%. What is the Sharpe ratio for each stock? Recession 50 20 40 You have been given the price at t =O (PO) and probability distribution for the price at t =1 (P1) for three stocks: (20%) Stock A Stock B Stock C 55 30 45 PO 70 50 55 Boom (30%) a. What is the expected holding-period return for each stock? b. What is the expected standard deviation for each stock? d. Which stock will you choose to hold? Normal (50%) 60 35 50 c. Suppose the risk-free rate of return is 2%. What is the Sharpe ratio for each stock? Recession 50 20 40
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To calculate the expected holdingperiod return for each stock we need to multiply the possible outcomes by their respective probabilities and sum them ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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