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

Answer rating: 100% (QA)

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