Question: Consider the following two stocks. Probabilities ( pi pi ) Stock a Stock b Recession p1= p1= 35% -3% 9% Normal p2= p2= 25% 5%

Consider the following two stocks.

	Probabilities (pipi )	Stock "a"	Stock "b"
Recession	p1=p1= 35%	-3%	9%
Normal	p2=p2= 25%	5%	-12%
Boom	p3=p3= 40%	17%	26%

What is the expected return of each stock? Enter your answers as a percentage rounded to 2 decimal places. Do not enter the percentage sign in your answer.

ra=ra= Correct response: 70.01

rb=rb= Correct response: 10.550.01

Click "Verify" to proceed to the next part of the question.

This question has 4 parts (i.e., you will be clicking "Verify" 4 times)

Using the correct answers from the previous question, what is the standard deviation of each stock? Enter your answer as a percentage rounded to 2 decimal places. Do not enter the percentage sign in your answer.

SDa=SDa= Correct response: 8.720.01

SDb=SDb= Correct response: 14.950.01

Click "Verify" to proceed to the next part of the question.

Using the correct answers from the previous question, what is the covariance between the two stocks? Enter your answer rounded to 2 decimal places.

Cov(a,b)=Cova,b= _________ <= Answer

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

2) Using the correct answers from the previous question, what is the standard deviation of each stock? Enter your answer as a percentage rounded to 2 decimal places. Do not enter the percentage sign...

Consider the following two stocks. Probabilities ( pi ) Stock "A" Stock "B" Recession p1= 31% -9% 2% Normal p2= 35% 5% -2% Boom p3= 34% 15% 25% The portfolio weights for stocks "A" and "B" are 0.2...

Consider the following two stocks. Probabilities (Pi) Stock "A" Stock "B" Recession 9% 10% P1 = 27% P2 = 35% 16% Normal Boom |-2% 24% P3 = 38% (17% The portfolio weights for stocks "A" and "B" are...

Consider the following two stocks. Probabilities (pi ) Stock "A" Stock "B" Recession p1= 38% -7% 9% Normal p2= 30% 7% -8% Boom p3= 32% 12% 23% The portfolio weights for stocks "A" and "B" are 0.2 and...

Consider the following two stocks. Probabilities (pi ) Stock "A" Stock "B" Recession p1= 21% -6% 7% Normal p2= 26% 10% -5% Boom p3= 53% 11% 23% The portfolio weights for stocks "A" and "B" are 0.2...

Consider the following two stocks. Probabilities (Pi) Stock "a" Stock "b" Recession P1 = 25% -3% 3% Normal P2 = 37% 8% -2% Boom P3 = 38% 15% 28% What is the expected return of each stock? Enter your...

Consider the following two stocks. Stock "A" Stock "B" Recession 10% 10% Probabilities (Pi) P1 = 35% P2 26% P3 = 39% Normal 1% 19% Boom 11% 24% The portfolio weights for stocks "A" and "B" are 0.2...

Answer and show how to calculate Covariance please . Consider the following two stocks. Probabilities (p) Stock "a" Stock "b" Recession P1 = 32% -5% 1% Normal P2= 25% 5% -2% Boom P3 = 43% 16% 22%...

Consider the following two stocks. Probabilities (P) Stock "a" Stock "b" Recession P1 32% = -5% 1% ||Normal = P2 25% 5% -2% Boom P3 43% 16% 22% What is the expected return of each stock? Enter your...

Global retailer Walmart was charged with breaking local labour laws in late 2006. Walmart had been found guilty of exploiting employees in Pennsylvania, USA by forcing them to work during their rest...

Johns Motor Cars serves as a personal car shopper. The clientele is limited to very upscale buyers and they sell only the finest quality motor vehicles. As John begins the process with his clients he...

If corn basis today is + 4 0 Dec ( 4 0 cents over December futures ) and in two months' time it is + 2 0 Dec ( 2 0 cents over December futures ) , which of the following statements is true? Basis...

A company is preparing completing their Cash Budget. The following data has been prepared for cash receipts and payments. January February March Cash receipts $1,061,200 $1,182,400 $1,091,700 Cash...