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Background info:rr if state occursState of the economy Probability of state of econ Stock 1 Stock 2
Recession .25 .02 -.20Normal .60 .32 .12Irrational exuberance .15 .18 .40
For this exercise, use the information provided for Problem 30 of Chapter 11 (page 375 of your textbook). Assume that the probability of the state of the economy has changed as follows:
The probability of a recession has increased to 30% and the probability for a normal state of economy is now 40%. The market risk premium has increased by 1% as well. What is the standard deviation of Stock I and II respectively?
A.) 12 and 20%B). 12.5 and 23%C). 1.25 and 2.326%D). Cannot be determined with the information given
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The Garcia company's bonds have a face value of $1,000, will mature in ten years, and carry a coupon rate of 16 percent. Assume interest payments are made semi-annually.
In 1895, the first a sporting event was held. The winner's prize money was $170. In 2007, the winner's check was $1,164,000.
You plan to make twenty equal yearly deposits beginning at the end of first year into this account. If the account pays interest at 10 percent p.a., what should be equal annual deposits?
Dweller uses the net present value method and has a discount rate of 12%. Will Dweller accept the project?
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