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Calculating Returns and Standard Deviations [LO1] Consider the following information: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Recession .21 .09 − .16 Normal .51 .12 .13 Boom .28 .17 .30 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 %
A stock has an expected return of 14.6 percent, the risk-free rate is 5.70 percent, and the market risk premium is 7.3 percent. Required: What must the beta of this stock be?
What is the present value of a lease on a warehouse, where the tenants have a lease that goes into perpetuity ad have agreed to pay $300 at the end of each month of the lease with an annual discount rate of 8 percent?
Ms. Manners Catering (MMC) has paid a constant rate of $3.14 per share dividend to its common stockholders for the past 9 years. MMC expects to continue this policy for the next two years, and then begin to increase the dividend at a constant rate eq..
Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 12.5% and 14.7%, respectively. The beta of A is .7, while that of B is 1.3. The T-bill rate is currently 7%, while the expected rate o..
Suppose our company has a beta of 1.5. The market risk premium is expected to be 9%, and the current risk-free rate is 6%. What is cost of equity using CAPM?
Stock A has an expected return of 13 percent and a 25 percent volatility. Stock B has an expected return of 9 percent and a 30 percent volatility. An investor can only purchase one of the two stocks. The investor bought stock A. What is her attitude ..
Acme Inc. just paid a dividend of $5 per share. Future dividends are expected to grow at a constant rate of 7% per year. What is the value of the stock if the required return is 16%?
Campbell Soup Co. (CPB) paid a $0.782 dividend per share in 2003, which grew to $0.98 in 2006. This growth is expected to continue. What is the value of this stock at the beginning of 2007 when the required return is 9.5 percent?
A company is considering a 5-year project to expand production with the purchase of a new automated machine using the latest technology. The new machine would cost $180,000 FOB St. Louis, with a shipping cost of $7,000 to the plant location. Installa..
Describe with a graph the payoff from the following portfolio: a long forward on some asset and a long put option on the same asset with the same maturity as the forward contract, and a strike price that is equal to the forward price at the time the ..
The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to return 32 percent in comparison to 14 percent in a normal economy and a negative 28 percent in a recessionary period. The probabilit..
What is the amount of bid using Borrowing and Lending, what is the amount of bid using Forward contract and what is the amount of bid using Options contract?
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