7. An analyst estimates that a stock has the following probabilities of return depending on the state of the economy: State of Economy Probability Return Good Normal .1 15% .6 13 Poor .3 7 What is the expected return of the stock?
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- You are comparing Stock A to Stock B. Given the following information, what is the difference in the expected returns of these two securities? State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Normal .75 .13 .16 Recession .25 −.05 −.21Consider an event study of the following stock. Realised return Market return t = 0 (event day) 0.1 0.1 t =1 0.06 0.04 t = 2 0.03 0.02 t = 3 0.015 0.01 Suppose that the estimated market model is . What is the CAR (cumulative abnormal returns) for t = 3?Consider information given in the table below and answers the question asked thereafter: State Probability return on stock A Return on stock B A 0.15 10% 9% B 0.15 6% 15% C 0.10 20% 10% D 0.18 5% -8% E 0.12 -10% 20% F 0.30 8% 5% i. Calculate expected return on each stock? On the basis of this measure, which stockyou will choose?ii. Calculate standard deviation of the returns on each stock? On the basis of thismeasure, which stock you will choose?iii. Calculate coefficient of variance of the returns on each stock? On the basis of thismeasure, which stock you will choose?
- A3) Finance What is the expected standard deviation of stock A's returns based on the information presented in the table? Outcome Probability of outcome Stock A return in outcome : Good 16% 65.00% Medium 51% 17.00% Bad "?" -35.00%1. The distribution of rates of return on XYZ stock is as follows Probability of State Occurring State of XYZ Stock Economy Return (%) Depression 0. 10 -4.5% Recession 0.20 4.4% Normal 0.50 12.0% Вoom 0.20 20.7% а. What is the expected return for the stock? b. What is the standard deviation of returns for the stock?Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Recession 0.30 0.05-0.15 Normal 0.55 0.15 0.15 Boom 0.15 0.20 0.35 Calculate the expected return for the two stocks.
- Stocks Y has the following probability distributions of expected future returns PROBABILITY Y% 0.1 8 0.3 12 0.4 15 0.2 35 0.6 52 What is the Risk per unit return of Stock Y?You have estimated the following probability distributions of expected future returns for Stocks X and Y: Stock X Stock Y Probability Return Probability Return 0.1 -12 % 0.2 4 % 0.1 11 0.2 7 0.3 14 0.3 11 0.3 30 0.2 17 0.2 40 0.1 30 What is the expected rate of return for Stock X? Stock Y? Round your answers to one decimal place.Stock X: % Stock Y: % What is the standard deviation of expected returns for Stock X? For Stock Y? Round your answers to two decimal places.Stock X: % Stock Y: % Which stock would you consider to be riskier? is riskier because it has a standard deviation of returns.Suppose your expectations regarding the stock price are as follows: State of the Market Probability Ending Price HPR (includingdividends) Boom 0.30 $ 140 53.5 % Normal growth 0.28 110 17.5 Recession 0.42 80 −12.0 Use the equations E(r)=Σsp(s)r(s)E(r)=Σsp(s)r(s) and σ2=Σsp(s) [r(s)−E(r)]2σ2=Σsp(s) [r(s)−E(r)]2 to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
- 1) what is the expected return rate for stock A 2) what is the expected return rate for stock B 3) what is the standard deviation of returns for stock A 4) what is the standard deviation of returns for stock B.Suppose that the index model for stocks A and B is estimated from excess returns with the following results:RA = 3% + .7RM + eARB = −2% + 1.2RM + eBσM = 20%; R-squareA = .20; R-squareB = .12What is the covariance between each stock and the market index?Based on the table below, what is the expected return of the stock? Probability 0.20 0.10 0.40 0.20 0.10 O 12.8% O 12.6% O 12.4% O 13.0% Return 8% 10% 12% 15% 20% 1