Hi, can you please solve this problem :) Thanks for your time! Quantitative Prob
ID: 2734208 • Letter: H
Question
Hi, can you please solve this problem :) Thanks for your time!
Quantitative Problem:
A.) You are given the following information for Wine and Cork Enterprises (WCE):
rRF = 3%; rM = 7%; RPM = 4%, and beta = 1.1
What is WCE's required rate of return? Round your answer to 2 decimal places. Do not round intermediate calculations
%
B.) If inflation increases by 2% but there is no change in investors' risk aversion, what is WCE's required rate of return now? Round your answer to two decimal places. Do not round intermediate calculations
C.) Assume now that there is no change in inflation, but risk aversion increases by 2%. What is WCE's required rate of return now? Round your answer to two decimal places. Do not round intermediate calculations
D.) If inflation increases by 2% and risk aversion increases by 2%, what is WCE's required rate of return now? Round your answer to two decimal places. Do not round intermediate calculations
E.)
You are given the following probability distribution for Wine and Cork Enterprises (WCE)
What is the stock's expected return? Round your answer to 2 decimal places. Do not round intermediate calculations.
%
F.) What is the stock's standard deviation? Round your answer to two decimal places. Do not round intermediate calculations.
G.) What is the stock's coefficient of variation? Round your answer to two decimal places. Do not round intermediate calculations.
State of Economy Probability Rate of return Strong 0.2 21% Normal 0.5 10% Weak 0.3 -5%Explanation / Answer
Answer:A) Calculation of the WCE's required rate of return:
Required rate of return=rRF+beta*RPM
=3%+1.1*4%
=7.4%
Answer:E)
Answer:F)
Answer:G) Coeffficoent of variation=Standard deviation/Expected return
=9.29%/7.70%
=1.21
State of Economy Probability Rate of return Expected return Strong 0.2 21% 4.20% Normal 0.5 10% 5.00% Weak 0.3 -5% -1.50% Total Expected return 7.70%Related Questions
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