QUESTION 1 An analyst estimates that a stock has the following return probabilit
ID: 2762333 • Letter: Q
Question
QUESTION 1
An analyst estimates that a stock has the following return probabilities and returns depending on the state of the economy. Calculate the percentage expected rate of returns.
QUESTION 2
Use the following table of states of the economy and stock returns to calculate the percentage standard deviation for Bradley.
Security Returns
if State Occurs
QUESTION 3
Use the following table of states of the economy and stock returns to calculate the expected return on a portfolio of 51 percent Roten and the rest in Bradley.
Security
if State
Returns
Occurs
QUESTION 4
Use the following table of states of the economy and stock returns to calculate the percentage standard deviation of a portfolio of a portfolio of 12 percent Roten and the rest in Bradley.
Security
if State
Returns
Occurs
QUESTION 5
Use the following information to calculate the percentage expected return a portfolio that is 55.3 percent invested in 3 Doors, Inc., and the rest invested in Down Co.:
QUESTION 6
Use the following information to calculate the percentage standard deviation of a portfolio that is 72.5 percent invested in 3 Doors, Inc., and the rest invested in Down Co.:
Stae of Economy Prob. Return Good 0.2 18% Normal 0.4 11 Poor ? 5Explanation / Answer
Answer-1
Expected Return = (0.2*18%) + (0.4*11%) +(0.4*5%) = 10%
Answer-2
E(X) = 0.2 * 22.2% + 0.5 * 7.1% = 14.65%
E(X^2) = 0.5 * 22.2%^2 + 0.5 * 7.1%^2 = 2.72%
standard deviation = sqrt ( E(X^2) - E(X)^2)
= 7.55%
Answer-3
Return on Roten = (.4*-13%) + (.6*42%) = 20%
Return on Bradley = (.4*34%) + (.6*11%) = 20.20%
Return on portfolio = (.51*20%) + (.49*20.20%) = 20.10%
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