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Assuming that Jerry Tan is a risk-adverse investor, recommend which stock he should select for long term investment.
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- Consider the following information about the various states of economy and the returns ofvarious investment alternatives for each scenario. Answer the questions that follow. % Return on T-Bills, Stocks and Market IndexState of the Economy Probability TBills Phillips Payup Rubbermade Market Index Recession 0.2 7 -22 28 10 -13 Below Average 0.1 7 -2 14.7 -10 1 Average 0.3 7 20 0 7 15 Above Average 0.3 7 35…Consider the following information about the various states of economy and the returns ofvarious investment alternatives for each scenario. Answer the questions that follow. % Return on T-Bills, Stocks and Market Index State of the Economy Probability T- Phillips Pay- Rubber- Market Bills up made Index Recession 0.2 7 -22 28 10 -13 Below Average 0.1 7 -2 14.7 -10 1 Average 0.3 7 20 0 7 15 Above Average 0.3 7 35 -10 45 29…An investor holds a portfolio of stocks and is considering investing in the DBB Company. The firm’s prospects look neutral and you estimate the following probability distribution of possible returns: Conditions P Returns on DBB Returns on DVI Recession 0.10 -30% -15% Below Average 0.20 -15% 4% Average 0.40 15% 8% Above Average 0.20 28% 20% Boom 0.10 40% 22% a) How much is the expected return for DBB? b) How much is the coefficient of variation for DBB? c) Now let’s say you want to add another asset, DVI, to your portfolio. You sell 20% of DBB to purchase DVI. How much is your expected return for this portfolio? d) How much is the coefficient of variation for the new portfolio? Please show the Excel formulas.
- Consider the following information about the various states of economy and the returns of various investment alternatives for each scenario. Answer the questions that follow. % Return on T-Bills, Stocks and Market Index States of Economy Probability T-Bills Phillips Pay-up Rubber-Made Market Index Recession 0.2 7 -22 28 10 -13 Below Average 0.1 7 -2 14.7 -10 1 Average 0.3 7 20 0 7 15 Above Average 0.3 7 35 -10 45 29 Boom 0.1 7 50 -20 30 43 Mean Variance (%) ^2 Standard Deviation Coefficient of Variation Covariance wit MP Correlation with Market Index Beta CAPM Req. Return Valuation ( Overvalued / Undervalued/Fairly Valued) Nature of Stock…Consider the following information about the various states of economy and the returns of various investment alternatives for each scenario. Answer the questions that follow. % Return on T-Bills, Stocks and Market Index States of Economy Probability T-Bills Phillips Pay-up Rubber-Made Market Index Recession 0.2 7 -22 28 10 -13 Below Average 0.1 7 -2 14.7 -10 1 Average 0.3 7 20 0 7 15 Above Average 0.3 7 35 -10 45 29 Boom 0.1 7 50 -20 30 43 Mean 7 16.9 20.7 19.6 15 Variance (%) ^2 0 549.09 244.124 358.04 313.6 Standard Deviation 0 23.4326695 15.6244712 18.92194493 17.7087549 Coefficient of Variation 0 1.386548491 7.54805372 0.965405354 1.18058366 Covariance wit MP 0 4.13 -275 231 313.60 Correlation with Market Index 0.9953 -0.9953 0.6894 1.0000 Beta 0 1.32…Consider the following information about the various states of economy and the returns of various investment alternatives for each scenario. Answer the questions that follow. % Return on T-Bills, Stocks and Market Index States of Economy Probability T-Bills Phillips Pay-up Rubber-Made Market Index Recession 0.2 7 -22 28 10 -13 Below Average 0.1 7 -2 14.7 -10 1 Average 0.3 7 20 0 7 15 Above Average 0.3 7 35 -10 45 29 Boom 0.1 7 50 -20 30 43 Mean Variance (%) ^2 Standard Deviation Coefficient of Variation Covariance wit MP Correlation with Market Index Beta CAPM Req. Return Valuation ( Overvalued / Undervalued/Fairly Valued) Nature of Stock…
- Consider the following scenario analysis: Scenario Probability Stocks Bonds Recession 0.30 -6 % +15% Normal Economy 0.30 +14 + 7 Boom 0.40 +26 +5 Calculate the expected rate of return and standard deviation for each investment? Which investment would you prefer?An investor holds a portfolio of stocks and is considering investing in the DBB Company. The firm’s prospects look neutral, and you estimate the following probability distribution of possible returns: Conditions P Returns on DBB Returns on DVI Recession 0.12 -33% -12% Below Average 0.15 -18% 7% Average 0.46 12% 11% Above Average 0.15 25% 23% Boom 0.12 37% 25% a) How much isthe expected return for DBB? b) How much isthe coefficient of variation for DBB? c) Now let’s say you want to add another asset, DVI, to your portfolio. You sell 35% of DBB to purchase DVI. How much is your expected return for this portfolio? d) How much isthe coefficient of variation for the new portfolio?Consider the following information about the various states of economy and the returns of various investment alternatives for each scenario. Answer the questions that follow. % Return on T-Bills, Stocks and Market Index State of the Economy Probability T- Phillips Pay- Rubber- Market Bills up made Index Recession 0.2 7 -22 28 10 -13 Below Average 0.1 7 -2 14.7 -10 1 Average 0.3 7 20 0 7 15…
- Blue Bell stock is expected to return 8.4 percent in a boom, 8.9 percent in a normal economy, and 9.2 percent in a recession. The probabilities of a boom, normal economy, and a recession are 6 percent, 92 percent, and 2 percent respectively. What is the standard deviation of the returns on this stock? Can the calculator an excel solution be provided?assume that an individual investor wants to select one market segment for a new investment. a forecast shows stable to declining economic conditions with the following probabilities: improving (0.2), stable (0.5), and declining (0.3). what is the preferred market segment for the investor, and what is the expected return percentage?Suppose that two factors have been identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 5%, and IR 4.0%. A stock with a beta of 1.2 on IP and 0.6 on IR currently is expected to provide a rate of return of 8%. If industrial production actually grows by 6%, while the inflation rate turns out to be 6.0%, what is your revised estimate of the expected rate of return on the stock? (Do not round intermediate calculations. Round your answer to 1 decimal place.)