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Consider the following information: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Recession .22 .10 − .17 Normal .52 .13 .12 Boom .26 .18 .29 Calculate the expected return for each stock. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return Stock A % Stock B % Calculate the standard deviation for each stock. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Standard deviation Stock A % Stock B %
Suppose that over the long run, the risk premium on stocks relative to Treasury bills has been 7.6% in the U.S. Suppose also that the current Treasury bill yield is 1.5%, but the historical average return on Treasury bills is 4.1%. Estimate the expec..
Calculate the expected Return of Stock A, expected Return of Stock B, standard Deviation of Stock A and standard Deviation of Stock B
Gold Star Industries is contemplating a purchase of computers. The firm has narrowed its choices to the SAL 5000 and the HAL 1000. Gold Star would need seven SALs, and each SAL costs $3,150 and requires $340 of maintenance each year. Assume that the ..
An investment will pay $1,351 two years from now, $2,973 four years from now, and $1,1303 five years from now. If the opportunity rate is 11.77 percent per year, what is the present value of this investment?
The Wolf's Den Outdoor Gear is considering replacing the equipment it uses to produce tents. The equipment would cost $1.4 million and lower manufacturing costs by an estimated $215,000 a year. The equipment will be depreciated over 8 years using str..
Research utilization processes in program evaluation. Critique at least two and explain how you would convince stakeholders to best utilize your evaluation.
Atlantis Fisheries issues zero coupon bonds on the market at a price of $304 per bond. Each bond has a face value of $1,000 payable at maturity in 10 years. It is callable in 5 years at a call price of $450. Using semi annual compounding, what is the..
An investment project has annual cash inflows of $4,200, $5,100, $6,300, and $5,500, and a discount rate of 15 percent. What is the discounted payback period for these cash flows if the initial cost is $6,900? What is the discounted payback period fo..
Suppose your company needs to raise $35 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 8 percent, and you’re evaluating two issue alternatives: How many of the coupon bonds would yo..
Then calculate the debt ratio of a service-oriented company, such as Cognizant Technology Solutions. Based on what you learned about leverage in this chapter, what would account for the difference in their debt ratios?
Based on the volatility smile usually observed in the market for exchange rates, which of these estimates would you expect to be too low and which would you expect to be too high?
She wants to select from one of three models: a three-month moving average, a weighted moving average (she believes that the weights should be 0.2, 0.3, and 0.5), and an exponential smoothing average in which she uses an alpha of 0.2 and an assumed f..
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