1. A Stocks return has the distribution as shown in the table below. Calculate the...
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1. A Stocks return has the distribution as shown in the table below. Calculate the stocks expected return, and standard deviation. SHOW ALL CALCULATIONS!! Market Demand Probability of Occurrence Return Associated with Occurrence Weak 0.15 -12% Below Average 0.2 1% Average 0.3 10% Above Average 0.2 18% Strong 0.15 23% A. Expected Return = 8.45% B. Standard Deviation of the Rate of Return = C. In a qualitative rather than a quantitative sense, what happens to the Standard Deviation of the Rate of Return calculated above if the return associated with Weak Market Demand increases from -12% to -10%, and the return associated with Strong Market Demand declines from 23% to 20%? Why? 2. Suppose the risk-free rate is 2.00% and the Required Return on the Market is 8.50%. What is the required rate of return on: A. a stock with a Beta = 0.80? B. a stock with a Beta = 1.35?
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