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Solve it please, Corporate Finance
Question 1
If the economy booms, RTF, Inc. stock is expected to return 10%. If the economy goes into a recessionary period, then RTF is expected to only return 4%. The probability of a boom is 60% while the probability of a recession is 40%. What is the variance of the returns on RTF, Inc. stock?
Question 2
The stock of Big Joe''s has a beta of 1.14 and an expected return of 11.6%. The riskfree rate of return is 4%. What is the expected return on the market?
Question 3 The Inferior Goods Co. stock is expected to earn 14% in a recession, 6% in a normal economy, and lose 4% in a booming economy. The probability of a boom is 20% while the probability of a normal economy is 55% and the chance of a recession is 25%. What is the expected rate of return on this stock?
Posted Date: 3/11/2013 5:55:24 AM  Location : United Arab Emirates
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