1) Suppose the Japanese stock market bubble peaked at 48,200 in 1989. Two and a

Question

1)

Suppose the Japanese stock market bubble peaked at 48,200 in 1989. Two and a half years later it had fallen to 19,800.

What was the percentage decline? (Negative answer should be indicated with a minus sign. Round your answer to 2 decimal places.)

%

2)

Compute the expected return given these three economic states, their likelihoods, and the potential returns:(Round your answer to 2 decimal places.)

Suppose the Japanese stock market bubble peaked at 48,200 in 1989. Two and a half years later it had fallen to 19,800.

Explanation / Answer

Percentage Decline=((48200-19800)/48200)*100=58.92%

Expected Return=0.31*32+0.43*20+0.26*33=27.10%

Dividend Income=740*3.02=2234.8

Capital Loss=740*(38.96-34.49)=3307.8

Net Loss=3307.8-2234.8=1073

Percentage of Loss=((1073)/(740*38.96))*100=3.72%

Night Riser=30/10=3

Whole Mart=35/11=3.2

Fruitfly=32/16=2

So Risk highest to lowest is WholeMart,Night Rider and Fruitfly.

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