Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. state of economy probability of state return on

State of Economy Probability of State Return on Asset A in State Return on Asset B in State Return...

Free

90.2K

Verified Solution

Question

Finance

State of EconomyProbability of StateReturn on Asset A in StateReturn on Asset B in StateReturn on Asset C in State
Boom0.350.040.210.3
Normal0.50.040.080.2
Recession0.150.04-0.01-0.26

a.??What is the expected return of each? asset?

b.??What is the variance of each? asset?

c.??What is the standard deviation of each? asset?

Answer & Explanation Solved by verified expert
4.4 Ratings (738 Votes)

Asset A
Scenario Probability Return% =rate of return% * probability Actual return -expected return(A)% (A)^2* probability
Boom 0.35 4 1.4 0 0
Normal 0.5 4 2 0 0
Recession 0.15 4 0.6 0 0
a. Expected return %= sum of weighted return = 4 Sum=b. Variance Asset A= 0
c. Standard deviation of Asset A% =(Variance)^(1/2) 0
Asset B
Scenario Probability Return% =rate of return% * probability Actual return -expected return(A)% (B)^2* probability
Boom 0.35 21 7.35 9.8 0.0033614
Normal 0.5 8 4 -3.2 0.000512
Recession 0.15 -1 -0.15 -12.2 0.0022326
a. Expected return %= sum of weighted return = 11.2 Sum=b. Variance Asset B= 0.00611
c. Standard deviation of Asset B% =(Variance)^(1/2) 7.81
Asset C
Scenario Probability Return% =rate of return% * probability Actual return -expected return(A)% (C)^2* probability
Boom 0.35 30 10.5 13.4 0.0062846
Normal 0.5 20 10 3.4 0.000578
Recession 0.15 -26 -3.9 -42.6 0.0272214
a. Expected return %= sum of weighted return = 16.6 Sum=b. Variance Asset C= 0.03408
c. Standard deviation of Asset C% =(Variance)^(1/2) 18.46

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

Transcribed Image Text

State of EconomyProbability of StateReturn on Asset A in StateReturn on Asset B in StateReturn on Asset C in StateBoom0.350.040.210.3Normal0.50.040.080.2Recession0.150.04-0.01-0.26a.??What is the expected return of each? asset?b.??What is the variance of each? asset?c.??What is the standard deviation of each? asset?

Other questions asked by students

Q

V The technique for calculating a bid price can be extended to many other types of problems....

Finance
Q

write a four pages essay on analyzing networks? this is for Linear Algebra.

Advance Math
Q

On January 1, an insurance company has 100,000 which is due to Linden as a life...

Basic Math
Q

What type of hemolysis would one find on a blood agar plate from the oral cavity...

Biology
Q

Harry took out a 25 year loan for 160 000 at 9 6 interest compounded...

Geometry
Q

Find the vertical asymptotes, if any, of the graph of the following rational function.f(x) ={(x+3)(4x-4)}/{(x-7)(x+8)}Select...

Basic Math
Q

Gladstorm Enterprises sells a product for $48 per unit. The variable cost is $35 per...

Accounting
Q

The maturity value of a $66000,9%,6-month note receivable is $67188. $66990....

Accounting
Q

345 13 4 ...

Accounting
Q

Exercise 6-2 (Algo) Service revenue [LO6-3] Ski West, Inc., operates a downhill ski area near...

Accounting
Q

Tramor Company reports the following cost data for its single product. The company regularly sells...

Accounting
Q

At the acquisition date, how much is the total fair value of the Subco? At...

Accounting