Question

#1 and #3

$39 per share. What is its holdin 2 e is $25 per share. What is Beta (HPR) The price of ACB, Inc. stock is $34. In six months, its price is $39 ne period return? (HPR) The price of BAC, Inc. stock is $124. In six months, its price is $25 holding period return? (Standard deviation) The following expectations have been made of a project.co expected return and standard deviation. Chert roject. Compute the projets 500 ret coeffic (Beta correl Economic state Probability of state Return -10% is the 5% Poor Average Good Excellent .25 50 .20 .05 10% (CAI 20% V prer 19 (CA

Answer 1

1). HPR = [Price in six months - Price now] / Price now

= [$39 - $34] / $34 = $5 / $34 = 0.1471, or 14.71%

3). Expected Return = $\sum_{i=1}^{n}$ [Probability_i * Return_i]

= [0.25 * -10%] + [0.50 * 5%] + [0.20 * 10%] + [0.05 * 20%]

= -2.50% + 2.50% + 2% + 1% = 3%

Standard Deviation = [$\sum_{i=1}^{n}${Probability_i * (Expected Return - Return_i)²}]^1/2

= [{0.25 * (3% + 10%)²} + {0.50 * (3% - 5%)²} + {0.20 * (3% - 10%)²} + {0.05 * (3% - 20%)²}]^1/2

= [42.25%² + 2%² + 9.8%² + 14.45%²]^1/2 = [68.5%²]^1/2 = 8.28%