Reference no: EM132466090
At t=0, the value of a stock is $80/share. A financial analyst summarizes the prabability distribution of the price per share and dividend paid per share of this stock at t=1 in the following table. Answer questions (a) through (e) accordingly
Scenario. Probability Value per share at t=1 Dividend per share at t=1
Strong Boom 0.05 $116.00 $4.00
Boom 0.25 $97.00 $3.00
Normal Growth 0.45 $90.00 $2.00
Recession 0.20 $63.00 $1.00
Severe Recession 0.05 $48.00 $0.00
(a) What are the corresponding holding period returns from t=0 to t=1 of the stock in each of the five scenarios shown in the table?
(b) What is the 5% value at risk (VaR) of the holding period return from t=0 to t=1 of the stock?
(c) What is the expected holding period return from t=0 to t=1 of the stock?
(d) What is the variance of the holding period return from t=0 to t=1 of the stock? (Round to six decimals, or four decimals after the percentage.)
(e) What is the standard deviation of the holding period return from t=0 to t=1 of the stock?
2. For a random variable X that follows a standard normal distribution, i.e., , it is known that . Assume that the return of a risky investment follows a normal distribution, and that it has an expected return of 7% and a standard deviation of 12%. Answer questions (a) and (b) accordingly.
(a) What is the 2% value at risk (VaR) of this risky investment? Show the steps using the information provided on the standard normal distribution that support your answers.
(b) On page 120 of your textbook, two special properties of the normal distribution are summarized. Your calculation in question (a) should confirm one of the two properties. Which one is it?
|
Company new required rate of return-porter plumbing
: Porter Plumbing's stock had a required return of 13% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%.
|
|
What is the amount that abc consulting would report
: What is the amount that ABC Consulting would report as the ending balance in the B. Conway, Capital account at the end of the year?
|
|
What is the cost of capital for the stock to firm
: The par value of the stock is ?$100?, and the dividend rate is 15 percent. What is the cost of capital for the stock to your? firm?
|
|
Percentage values of the average costs of merged firms
: Carl's tires is planning to merge with Joe's Body shop to offer a combined auto repair service shop. Carl's Tires has total costs of $1,500,000
|
|
What are the corresponding holding period returns
: What are the corresponding holding period returns from t=0 to t=1 of the stock in each of the five scenarios shown in the table?
|
|
Prepare allertons entry to record its acquisition of deluxe
: Prepare Allerton's entry to record its acquisition of Deluxe in its accounting records assuming the following cash exchange amounts: $137,000 and $88,000.
|
|
Determine service response time balanced scorecard measures
: Determine Service response time balanced scorecard, Information system availability, New product development time measures
|
|
Quality assurance matrix and quality control story
: Describe the tools that can be implemented in the application of Quality Assurance Matrix (QAM) and Quality Control Story.
|
|
Can form a utilitarian case against the settlement
: Starting from this frustration and unhappiness on the part of those who pay full price, can you form a utilitarian case against the settlement's free classes?
|