An analyst is studying the movement of the stock Shrek. His research and came up with a different rates of return for Shrek, 25% for strong and 10% for weak economic scenarios. Based on the latest economic outlook, the probability of having a strong, normal, and weak economy, are 30%, 50%, and 20%, respectively. The total expected return of Shrek stock is 17% considering the various probabilities. Determine the rate of return of Shrek if the economy turns normal. Sample format: XX.XX%

An analyst is studying the movement of the stock Shrek. His research and came up with a different rates of return for Shrek, 25% for strong and 10% for weak economic scenarios. Based on the latest economic outlook, the probability of having a strong, normal, and weak economy, are 30%, 50%, and 20%, respectively. The total expected return of Shrek stock is 17% considering the various probabilities. Determine the rate of return of Shrek if the economy turns normal. Sample format: XX.XX%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 14P

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Similar questions

An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = 20.4, and di = 1.3, what is the stock’s predicted return?
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