What is the expected return on a stock if the firm will earn 24% during a...
What is the expected return on a stock if the firm will earn 24% during a period of economic boom, 14% during normal economic periods, and 2% during a period of recession if the probabilities of these economic environments are 20%, 65%, and 15%, respectively?
What is the required return using the capital asset pricing model if a stock's beta is 1.2 and the individual, who expects the market to rise by 11.2%, can earn 4.4% invested in a risk-free Treasury bill?
You bought a stock with a beta of 1.4 and earned a return of 8.3%. Did you outperform the market if, during the same period, the market rose by 7.4% and you could have earned 5.4% by investing in a Treasury bill?
Homework Answers
1
=24%*20%+14%*65%+2%*15%=14.20%
2
=4.4%+1.2*(11.2%-4.4%)=12.56%
3
=8.3%-5.4%-1.4*(7.4%-5.4%)=0.10%
Yes outperformed the market as we have earned positive alpha
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What is the expected return on a stock if the firm will earn 24%
during a...
What is the required return using the capital asset pricing model if a stock's beta is...
What is the required return using the capital asset pricing model if a stock's beta is 1.2 and the individual, who expects the market to rise by 11.2%, can earn 4.4% invested in a risk-free Treasury bill?
A stock has an expected return of 10.38 percent. Based on the following information, what is...
A stock has an expected return of 10.38 percent. Based on the following information, what is the stock's return in a boom state of the economy? State of Economy Probability of State of Economy Rate of Return if State Occurs Recession .29 − 9.7 % Normal .40 11.2 % Boom .31 ? Multiple Choice 26.35% 28.11% 29.38% 30.66% 24.59%
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Shares of Rodger's Insurance stock will return -7.4% during a recession, 5.6% during a normal economy,...
Shares of Rodger's Insurance stock will return -7.4% during a recession, 5.6% during a normal economy, and 16.3% during a boom economy. If there is a 6% chance of recession, and 20% chance of a boom, what is the expected return for Rodger's? (Enter your response as a percentage with two decimal places, ex: 12.34)
The rate of return on the common stock of Flowers by Flo is expected to be...
The rate of return on the common stock of Flowers by Flo is expected to be 13 percent in a boom economy, 11 percent in a normal economy, and only 6 percent in a recessionary economy. The probabilities of these economic states are 15 percent for a boom, 80 percent for a normal economy, and 5 percent for a recession. What is the variance of the returns on this stock?
The rate of return on the common stock of Lancaster Woolens is expected to be 18...
The rate of return on the common stock of Lancaster Woolens is expected to be 18 percent in a boom economy, 8 percent in a normal economy, and only 2 percent in a recessionary economy. The probabilities of these economic states are 12 percent for a boom and 10 percent for a recession. What is the variance of the returns on this common stock?
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If the economy booms, RTF, Inc., stock is expected to return 9 percent. If the economy goes into a recessionary period, then RTF is expected to only return 5 percent. The probability of a boom is 71 percent while the probability of a recession is 29 percent. What is the variance of the returns on RTF, Inc., stock? .000234 .039200 .000138 .000329 .018150 A stock has a beta of 1.20 and an expected return of 11.3 percent. If the risk-free...
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The rate of return on the common stock of Flowers by Flo is expected to be 14% in a boom economy, 8% in a normal economy, and only 2% in a recessionary economy. The probabilities of these economic states are 20% for a boom, 60% for a normal economy, and 20% for a recession. What is the variance of the returns on the common stock of Flowers by Flo? a. .001044 b. 0.00144 c. .001863 d. .002001 e. .002471
Calculate the expected return on stock of Gamma Inc.: State of the economy Probability of the...
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