1. The common stock of Placo Enterprise had a market price of $12 on the day you...
Question:
1. The common stock of Placo Enterprise had a market price of $12 on the day you purchased it just one year ago. During the past year, the stock had paid a $1 dividend and closed at a price of $14. What rate of return did you earn on your investment in Placo’s stock?
2. BJ Gautney Enterprise is evaluating a security. One-year treasury bills are currently paying 2.9 percent. Calculate the following investment’s expected return and its standard deviation. Should Gautney invest in this security?
Probability | Return |
.15 | -3% |
.30 | 2% |
.40 | 4% |
.15 | 6% |
3. Logan Morgan is considering an investment in one of two portfolios. Given the information that follows, which investment is better, based on risk (as measured by the standard deviation) and the expected rate of return?
Portfolio A | Portfolio B | ||
Probability | Return | Probability | Return |
.20 | -2% | .10 | 5% |
.50 | 19% | .30 | 7% |
.30 | 25% | .40 | 12% |
.20 | 14% | ||
Expert Answer:
1 Computation of the rate of return Rate of return Ending value Beginning value Dividend Beginning v... View the full answer
