Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. consider the following information about stocks a,

Consider the following information about stocks A, B, and C: State...

70.2K

Verified Solution

Question

Finance

Consider the following information about stocks A, B, and C:

State of economy

Probability of state of economy

Rate of return if state occurs

Stock A

Stock B

Stock C

Boom

Bust

0.70

0.30

0.20

-0.05

0.15

-0.10

0.30

-0.15

The expected return on the market portfolio is 8% and the risk-free rate is 3%.

(a) What is the expected rate of return on stock A, B, and C, respectively?

(b) What is the standard deviation of stock A, B, and C, respectively?

(c) Which stock is the safest for rational investors? Back up your assertion.

(d) What is the portfolio expected return if it is composed of 30% of Stock A, 50% of Stock B, and 20% of Stock C?

(e) What is the standard deviation of a portfolio if it is composed of 30% of Stock A, 50% of Stock B, and 20% of Stock C?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

The nervous system, composed of the brain, spinal cord, nerves, and ganglia, serves as the human...

Medical Sciences
Q

A process considered to be in control measures an ingredient in ounces. A quality inspector took...

General Management
Q

Solve the given initial-value problem. X' = 2    4 ?1 6 X, X(0) = ?1 8 X(t) =

Advance Math
Q

How does the field of science gain knowledge and understanding?through the testing of hypothesesthrough deductive...

Biology
Q

Converting CO2 into glucose releases energy anabolic requires energy anabolic releases energy catabolic Orequires energy...

Biology
Q

The majority of organisms in which of these domains carry out the process shown in...

Biology
Q

What value of x would make AABC APQR A B O A 11 OB 6...

Geometry
Q

A man with $20,000 to invest decides to diversify his investments by placing $10,000 in...

Basic Math
Q

If a redemption is treated as a dividend (nonqualified), what happens to the basis of...

Accounting
Q

Equipment acquired at the beginning of the year at a cost of $77,000 has an...

Accounting
Q

Hello, attached below is a equity statement. i also provided the closing share price. With...

Accounting
Q

CX Enterprises has the following expected dividends: $1.01 in one year, $1.16 in two years,...

Finance