Suppose your expectations concerning the stock industry are as follows: State of the Economy Probcapacity HPRBoom 0.3 41%Normal development 0.6 24Recession 0.1 -18Use above equations to compute the intend and conventional deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.)


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Typical = <0.3 × 0.41> + <0.6 × 0.24> + <0.1 × (-0.18)> = 0.249 or 24.90%Standard Deviation = Var = <0.3 × (0.41 - 0.249^2> + <0.6 × (0.24 - 0.249^2> + <0.1 × (-0.18 - 0.249)^2 = 0.0262 Standard Deviation = Sq. rt 0.0262 = .1620 = 16.20%
The stock of Business Adendeavors sells for $40 a share. Its most likely dividend payout and also end-of-year price depend on the state of the economic situation by the finish of the year as follows: Dividend Stock PriceBoom $2.80 $48Regular economic climate 1.80 43Recession .90 34a. Calculate the meant holding-duration return and typical deviation of the holding-duration return. All 3 scenarios are equally most likely. (Do not round intermediate calculations. Round your answers to 2 decimal locations.)
HPR = Ending Price - Beginning Price + Cash Dividfinish / Beginning Pricea. The holding duration returns for the 3 scenarios are:Boom: (48 - 40 + 2.8)/40 = 0.27 = 27%Normal: (43 - 40 + 1.8)/40 = 0.120 = 12.0%Recession: (34 - 40 + .90)/40 = -0.1275 = -12.75% = <(1/3) × 0.27> + <(1/3) × 0.120> + <(1/3) × (-0.1275) =0.08750 or 9%Variance = <(1/3) × (0.27 - 0.08750)^2> + <(1/3) × (0.120 - 0.08750)^2> + <(1/3) × (-0.1275 - 0.08750)^2> = .026863Std. Dev = Sq. Rt .026863 = .16390 = 16.39%
The stock of Company Adendeavors sells for $40 a share. Its likely dividfinish payout and end-of-year price depfinish on the state of the economic situation by the finish of the year as follows: Dividfinish Stock PriceBoom $2.80 $48Typical economic situation 1.80 43Recession .90 34b. Calculate the expected return and conventional deviation of a portfolio invested fifty percent in Company Adendeavors and also fifty percent in Treasury bills. The rerevolve on bills is 5%. (Do not round intermediate calculations. Round your answers to 2 decimal areas.)
You manage an equity fund with an supposed threat premium of 11.2% and a traditional deviation of 26%. The rate on Treasury bills is 4.2%. Your client chooses to invest $70,000 of her portfolio in your equity money and also $30,000 in a T-bill money sector fund. What is the reward-to-volatility proportion for the equity fund? (Round your answer to 4 decimal areas.)
Reward to volatility ratio = Portfolio Risk Premium / Standard Deviation of portfolio excess return11.2% / 26% = .4308
If you are promised a nominal rerotate of 12% on a 1-year investment, and also you expect the rate of inflation to be 3%, what genuine rate carry out you intend to earn?
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