A stock will provide a rate of return of either -18% or 26%. If both possibilities are equally likely, calculate the stock's expected return and standard deviation. (Do not round intermediate calculations. Enter your answers as a whole percent.) Expected return Standard deviation

Q: Stocks X and Y have the following probability distributions of expected future returns: Calculate…

A: Standard deviation: The standard deviation is a measurement of the variance or dispersion of a set…

Q: A stock has an expected return of 12.5 percent and a beta of 1.16, and the expected return on the…

A: Expected return of stock (Er) = 0.125 (12.5%) Beta (b) = 1.16 Expected return on the market (Rm) =…

Q: ASsume the following data for a stock: Beta 15, risk-free rate = 4 percent, market rate of return 12…

A:

Q: You own a portfolio that is 28 percent invested in Stock X, 43 percent in Stock Y, and 29 percent in…

A: Portfolio is the collection of securities. portfolio return formula: portfolio return =∑nwn×rn…

Q: Stocks A and B have the following probability distributions of expected future returns: Probability…

A: Since question involves multiple subparts , we will answer 1st sub 3 parts for you as per prescribed…

Q: You own a portfolio that has $2,600 invested in Stock A and $3,700 invested in Stock B. Assume the…

A: The expected return of the portfolio is the weighted average return

Q: A stock has a beta of 1.12, the expected return on the market is 10 percent, and the free rate is 3…

A: In this we have to use capital assets pricing formula for calculation of expected return.

Q: A stock will provide a rate of return of either -18% or 26%. If both possibilities are equally…

A: Standard deviation is measure of risk and it measures the deviation from mean of the return and how…

Q: A stock has a beta of 1.32, the expected return on the market is 10 percent, and the risk-free rate…

A: A stock is a financial instrument issued by a corporation to obtain equity funds. The required rate…

Q: The following are estimates for two stocks.   Stock Expected Return Beta Firm-Specific Standard…

A: Here, Standard Deviation of Market is 22% Risk-free rate is 11% Expected Return, Beta and…

Q: A stock has an expected return of 15.6 percent, the risk-free rate is 6.2 percent, and the market…

A: The beta of the stock can be calculated with the help of CAPM equation.

Q: A stock has an expected return of 14.2 percent, the risk-free rate is 6.5 percent, and the market…

A: Given: Expected return = 14.2% Risk free rate = 6.5% Market risk premium = 7.7%

Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…

A: Calculation of standard deviation for each stock: Answer: Standard deviation of A is 31.30% Standard…

Q: A stock will provide a rate of return of either -29% or 34% If both possibilities are equally…

A: Expected return = summation of [probability ×return]

Q: A stock has a beta of 0.8 and an expected return of 10.6 percent. If the risk-free rate is 2.7…

A: Given: Beta =0.8Expected return =10.6% Risk free rate =2.7%

Q: Stocks A and B have the following probability distributions of expected future returns:…

A: 1.) Computation of the expected rate of return of stock A: Hence, the expected return of stock A is…

Q: What are the arithmetic and geometric (Answer in that order.) average returns for a stock with…

A: Returns 9.4% 8.2% -8.3% 4.1% 9.5%

Q: A stock has the following projected rates of return (outcomes): 10%, 15%, and 30%. The probabilities…

A: Formulas:

Q: From the following information calculate Beta for stock A, required return of stock A as per CAPM…

A: In this we have to calculate the Beta of stock and from that get required rate.

Q: Suppose the expected return for the market portfolio and risk-free rate are 13 percent and 3 percent…

A: Treynor ratio = (Expected return - Risk free rate) / BetaTreynor ratio of the market = (Expected…

Q: A stock has an expected return of 12 percent, the risk-free rate is 5 percent, and the market risk…

A: The beta of stock can be calculated with the help of below expression:

Q: You are given the returns for the following three stocks: TTTT Year Stock A Stock B Stock C 1 14%…

A: Arithmetic and Geometric returns are two measures to estimate the annual return from investment…

Q: A stock has a beta of 0.65, the expected return on the market is 15%, and the risk- free rate is 8%.…

A: In the given problem we require to calculate the expected return on stock: According to CAPM i.e.…

Q: The index model has been estimated for stock A with the following results: RA = 0.01 + 1.2RM + eA.…

A: Standard deviation is referred to as the measure of the dispersion of a dataset relative to its mean…

Q: Assume the risk-free rate is 2%. Calculate the stock's expected return, standard deviation,…

A: Expected return refers to the loss or profit that an investor anticipates for investing in a…

Q: estimate the standard deviations of Stocks A and B. Then, compute the expected return, standard…

A: a) Standard deviation of A= (Beta2*Market SD2+Firm-specific SD2)(1/2)…

Q: Consider two stocks, Stock D, with an expected return of 13 percent and a standard deviation of 31…

A: Weight of stock in minimum variance portfolio is calculated by this formula. sigma stands for…

Q: A stock has an expected return of 15.6 percent, the risk-free rate is 6.2 percent, and the market…

A: Information Provided: Expected Return = 15.6% Risk-free rate = 6.2% Market Risk Premium = 7.7%

Q: Stock M N O P Standard deviation 12% 20% 15% 30% 1. Which stock is the riskest?…

A: The relationship between the return and risk is direct. When risk of stock is more, return provided…

Q: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate ofreturn on an average…

A: The riskiness of security is measured by "Beta". Beta measures the volatility of the stock with…

Q: Stocks X and Y have the following probability distributions of expected future returns: Calculate…

A: Here, Probability X Y 0.3 90% -35% 0.4 15% 0 0.3 -60% 20 Expected rate of Return of X…

Q: You own a portfolio that has $1,600 invested in Stock A and $2,700 invested in Stock B. Assume the…

A: Expected return of portfolio = (weight of stock A × Expected return of A) + (weight of stock B ×…

Q: Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .092, E(RB) =…

A: The expected rate of return of the portfolio is the weighted average rate of return of all the…

Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…

A:

Q: Dotbomb’s stock has the following projected rates of return (outcomes): 10%, 15%, and 30%. The…

A: Portfolio Expected Return:  It is the sum weighted average rate of return of each security consist…

Q: A stock's returns have the following distribution: Demand for the Company's Products Probability of…

A: Expected return E(r) = ∑p*r Standard deviation SD(r) = √p(r-E(r))2 Coefficient of variance =…

Q: Consider information given in the table below and answers the question asked thereafter: State…

A:

Q: Consider two stocks, Stock D, with an expected return of 13 percent and a standard deviation of 27…

A: Minimum variance portfolio is calculated by this formula: σ stands for standard deviation, ρ stands…

Q: A stock has an expected return of 11.85 percent, its beta is 1.08, and the risk-free rate is 3.9…

A: Investors have different options to make investments, and the motive behind investments is to…

Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…

A: Given information: Beta of stock A is 1.30 Beta of stock B is 1.60

Q: Stocks A and B have the following probability distributions of expected future returns:…

A: Probability Return Expected return A B C=A*B 0.1 -20% -2.00% 0.2 7% 1.40% 0.4 15% 6.00%…

Q: A stock has a beta of 1.08, the expected return on the market is 10.2 percent, and the risk-free…

A: Expected return on the market (Rm) = 0.102 beta (b) = 1.08 Risk free rate (Rf) = 0.0485 Expected…

Q: Required Rate of Return Stock R has a beta of 1.4, Stock S has a beta of 0.45, the expected rate of…

A: Beta is one of the measure of volatility or risk of the stock. More beta means more risk and less…

Q: A stock has a beta of 1.14, the expected return on the market is 10.8 percent, and the risk- free…

A: The expected return of the stock can be calculated with the help of CAPM equation

Q: A stock has a beta of 1.04, the expected return on the market is 10 percent, and the risk- free rate…

A: Cost of equity: It can be defined as the rate of return that is provided by the company to its…

Q: Stocks A and B have the following probability distributions of expected future returns: Probability…

A: Here: Probability     A B 0.1 (11%) (38%) 0.2 5% 0% 0.5 13% 21% 0.1 18% 26% 0.1 31% 36%

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.