Calculate the standard deviation of this scenario Outcome 1: Recession. Probability = 40%. Return = 7.38%. Outcome 1: Recovery. Probability = 60%. Return = 17.27%. Answer in % terms w/o % sign and to 4 decimal places (1.2345)
Q: value of $956,000. If the market-to-book ratio is 2.86 times, what is the company's WACC? O 7.92% O…
A: The weighted average cost of capital measures the typical cost a business pays to finance its…
Q: Consider a 6%, 15-year, semi-annual payment bond with a par value of $1000. Compute the current…
A: First we need to calculate bond price by using equation below. Bond price will the sum of present…
Q: Arnold Inc. is considering a proposal to manufacture high-end protein bars used as food supplements…
A: NPV is defined as the sum of the present values of all future cash inflows less the sum of the…
Q: Barbara Cartland is scheduled to receive $20,000 in two years. When she receives it, she will invest…
A: Here,Amount needs to be received in 2 years is $20,000Time Period of Investment after 2 years is 5…
Q: tsche Transport can lease a truck for four years at a cost of €32,000 annually. It can instead buy a…
A: Cost of buying=€82,000Salvage value after 4 years= €21,500Annual maintenance=€12,000Discount…
Q: If vou deposit $5060 al 6 5% compounded semiannually, what will the total amount after 16 years?
A: The present when compounded at a given interest rate for a given period of time gives the future…
Q: Based on your Ratio Analysis, what steps would you advise your new client to take due to their…
A: Ratio analysis is a financial analysis technique that involves evaluating and interpreting various…
Q: List the Opportunities and Threats identified through General Environmental Analyses - Developed and…
A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…
Q: Franklin's investment fund had a balance of $270,000 on January 1, 1995 and a balance of $449,000…
A: Average date of payment refers to the date at which the amount owed to be paid by the borrower to…
Q: A stock with a beta of 1.2 has an expected rate of return of 16%. If the market return this year…
A: The expected rate of return is 16%.When market return turns out to be 10% below expected, then the…
Q: colgate palmolive Company has just paid an annual dividend of $1.57. Analysts are predicting…
A: Price of the stock can be determined by using the dividend discount model.Dividend discount model is…
Q: In Elliott Wave Analysis, a full cycle is made up of how many waves? a. Impulse waves only b.…
A: Elliott Wave Theory, developed by Ralph Nelson Elliott in the 1930s, is a method for analyzing and…
Q: What about D-J?
A: IRR is also known as Net Present calue. It is a capital budgeting techniques which helps in decision…
Q: A church congregation has raised $37,625 for future outreach work. If the money is invested in a…
A: Future value = P x (1+i )n Where P= Principle Amount Invested i= Interest…
Q: An investor buys $8,000 worth of a stock priced at $40 per share using 50% initial margin. The…
A: Margin trading is the practice of using borrowed funds from a broker to invest in financial…
Q: Ted is considering a project that will produce cas years. The required rate of return is 15.5…
A: Payback is very simple method of capital budgeting and that consider the period required to recover…
Q: Consider the table given below to answer the following question. Asset value Earnings Year Net…
A: Stock valuation is the process of determining the intrinsic value of a company's stock. Various…
Q: Sam purchased Walsh stocks at $200 per share three month ago and did not receive any dividends so…
A: A financial concept known as future value (FV) shows how much money is expected to be worth at a…
Q: If the firm uses money market hedge, one year from now, their accounts receivables will fetch them:…
A: The relative worth of two currencies, or the amount of one currency that may be exchanged for one…
Q: Chauhan Corporation has a debt-equity ratio of .9. The company is considering a new plant that will…
A: External financing refers to the funds a company raises from sources outside the organization to…
Q: What is your percentage rate of return if, in one year, IBM stock is selling for $36 per share?
A: The percentage rate of return (or simply "rate of return") is a financial measure used to evaluate…
Q: You just purchased a parcel of land for $10,000. If you expect a 12% annual rate of return on your…
A: Future value is that amount which will be require to paid at some specified period of time. It…
Q: You can calculate the yield curve, given inflation and maturity-related risks. Looking at the yield…
A: As per Q&A guidelines, The first question should be answered when multiple questions posted…
Q: You have invested in a business that proudly reports that it is profitable. Your investment of $4000…
A: An investor invests in a project to earn a good amount of return. The more risk taken the more…
Q: Suppose you wish to retire at the age of 65 with $80,000 in savings. Determine your monthly payment…
A: Future value is an estimate of future cash flows that may be received at a future date, discounted…
Q: You have a risk-free bond with 2 years to maturity. The bond has a face value of $ 1000 and a coupon…
A: Bond refers to the debt market security which offers the investor a fixed set of payments for a…
Q: Dave borrowed $440 and paid $44 in interest when he repaid the principal after one year. The lender…
A: The effective cost of a loan refers to the total cost that a borrower will incur over the life of…
Q: Mary's credit card situation is out of control because she cannot afford to make her monthly…
A: Monthly payment refers to the function of time, the value of money that is paid for the repayment of…
Q: A call option is currently selling for $5.2. It has a strike price of $40 and five months to…
A: It is a contract amongst the 2 parties that derives their price from the underlying asset. Following…
Q: Consider a four year annual bond paying a 7% coupon, with a yield to maturity of 6.0%. What is the…
A: Bond duration is a measure of a bond's sensitivity to changes in interest rates and it estimates the…
Q: Cold Boxes Ltd. issued one hundred $1,000 face value bonds. This bond's current market value of…
A: A bond is a kind of debt security issued by the government and private companies to the public for…
Q: What is the effective annual rate of interest if $1100.00 grows to $1400.00 in four years compounded…
A: Principal amount (initial investment) (P)= $ 1100Future value of investment (FV) = $1400Number of…
Q: Esfandairi Enterprises is considering a new three-year expansion project that requires an initial…
A: In a typical capital budgeting decision, we have a project whose quantum and timing of cash flows…
Q: Landman Corporation (LC) manufactures time series photographic equipment. It is currently at its…
A: Net present value (NPV):Net Present Value (NPV) is a financial metric that calculates the…
Q: On January 1, a company issues 8%, 5-year, $300.000 bonds that pay interest semiannually. On the…
A: Bonds are debt instruments issued by companies. The issuing company pays periodic (usually…
Q: Assume that a 10-year bond pays interest of $55 every six months and will mature for $1,000. Also…
A: Bonds are debt instruments issued by companies. The value of a bond today is the present value of…
Q: You are considering making a movie. The movie is expected to cost $10.6 million up front and take a…
A: Payback period is the period required to recover initial amount of investment but do not consider…
Q: (15. Samsung bond has been just issued under th e conditions: 10 years to maturity, coupon rate 7 %,…
A: Coupon bonds are debt securities that pay periodic interest payments, known as coupons, to the…
Q: Q6. Small businesses are generally operated by the owner/operator concept. There is also a tendency…
A: The cash flow plays an important role when dealing with different types of risk and management of…
Q: P10–24 ALL TECHNIQUES, CONFLICTING RANKINGS Nicholson Roofing Materials Inc. is considering two…
A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…
Q: If Boeing decides to use a money market hedge, what is the USD amount it would receive in 1 year…
A: A money market hedge is a financial strategy used by businesses and investors to protect themselves…
Q: you have decided to save some money. If the interest rate is 12%, how much will you have in 3 years…
A: Future value refers to the worth of the invested amount at the end of the maturity, It represents…
Q: You're trying to save to buy a new $195,000 Ferrari. You have $32,000 today that can be invested at…
A: Here, ParticularsValuesFuture value of money (FV) $1,95,000.00Present value (PV) $…
Q: Possible outcomes for three investment alternatives and their probabilities of occurrence are given…
A: Coefficient of variation can be solved by using the following formulaCoefficient of variation =…
Q: Future value with periodic rates. Matt Johnson delivers newspapers and is putting away $17 at the…
A: Future value of annuity refers to the total amount that an investment will grow to at a specific…
Q: Consider the following bond: a 19-years $1,000 callable bond with 9 years until the next call date.…
A: Here, Par Value of Bond $ 1,000.00Coupon Rate6.50%Time to Maturity 19Time to Call9Call…
Q: 1. What would be the expected net present value (NPV) of this project if the project’s cost of…
A: Multiple questions were asked & as per honoring guidelines answered the first question. Net…
Q: Corf's Dog House is considering the installation of a new computerized pressure cooker for hot dogs.…
A: Increase in sales$9,500Annual operating cost$13,300Purchase and installation cost$50,100Estimated…
Q: When Deborah purchased her home for 310,000 she put down a deposit of 8% besides her original…
A: Down payment = purchase price * 8% = 310000* 8% = $…
Q: of year two, right after the $1.50 dividend is paid. The total return that you will receive on your…
A: The constant growth model is a stock valuation method used in finance to determine a stock's…
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.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
- Following are three economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast growth 0.24 33 % Slow growth 0.52 7 Recession 0.24 –40 Determine the standard deviation of the expected return. (Do not round intermediate calculations and round your answer to 2 decimal places.)The past five monthly returns for PG&E are −3.23 percent, 4.03 percent, 3.83 percent, 6.56 percent, and 3.64 percent. Compute the standard deviation of PG&E’s monthly returns. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Standard Deviation %Suppose the returns on an asset are normally distributed. The historical average annual return for the asset was 5.7 percent and the standard deviation was 18.3 percent. a. What is the probability that your return on this asset will be less than –4.1 percent in a given year? Use the NORMDIST function in Excel® to answer this question. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What range of returns would you expect to see 95 percent of the time? (Enter your answers for the range from lowest to highest. A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c. What range of returns would you expect to see 99 percent of the time? (Enter your answers for the range from lowest to highest. A negative answer should be indicated by a minus sign. Do not round intermediate calculations…
- Use the following information to compute the standard deviation of returns: Yearly Returns Year Return (%) 1 19 2 1 3 10 4 26 5 4 a. 12% b. 10.42% c. 0.87% d. 108.5%Based on the following information, what is the standard deviation of returns? State of Economy Probability of Stateof Economy Rate of Return ifState Occurs Recession .28 − .096 Normal .41 .111 Boom .31 .221. Using 625 trading days of data, you estimated the daily log return follows a normal distribution with a mean of 5 bps and and a stdev of 125 bps. Q1a. based on information above, what is the probability of true daily log return average is 0? can you reject the true mean is 0? can you reject the true mean is 10 bps? Q1b. what is the 90, 95, and 99% confidence interval for your mean return estimate? Q1c. what is the mean log return and stdev of log return over one year period and four year period (assuming 252 trading days per year)? Q1d. based on Q1c what is the probably of losing money (negative log return) or doubling your money (total log return = ln(2)) over 1 year and 4 year period?
- A regression line has an intercept value of 174.71 and slope value of 25.22. What is the predicted value (the y-value) in the 100th period (the x-value is 100)? Round to two decimal places.Suppose the returns on an asset are normally distributed. The historical average annual return for the asset was 5.2 percent and the standard deviation was 10.6 percent. a. What is the probability that your return on this asset will be less than –9.7 percent in a given year? Use the NORMDIST function in Excel® to answer this question. b. What range of returns would you expect to see 95 percent of the time? c. What range of returns would you expect to see 99 percent of the time?You are given the following information: State of Economy Probability ofState of Economy Rate of ReturnIf State Occurs Depression .07 −.097 Recession .17 .067 Normal .42 .138 Boom .34 .219 Calculate the expected return. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return % Calculate the standard deviation. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Standard deviation %
- 1.) On a single chart, plot the value of $1 invested in each of the five indexes over time. I.e., for all ??, plot the cumulative return series for each index: ?????? = (1 + ?��1)(1 + ?��2)...(1 + ????) What patterns do you observe? (10 points) 2.) Plot a histogram of only the Global index returns. Does the distribution look normal? (5 points) 3.) Estimate the following for each of the indices. In calculating the statistics, “monthly” can be interpreted as “not annualized”. (30 points) a. Arithmetic average of monthly returns, and annualized arithmetic return using the APR method b. Geometric average of monthly returns, and annualized geometric return using the EAR method. Why does the geometric average differ from the arithmetic average? c. Standard deviation of monthly returns, and annualized standard deviation d. Sharpe Ratio of monthly returns, and annualized Sharpe Ratio e. Skewness of monthly returns f. Kurtosis of monthly returns g. 5% Value at Risk (VaR) of…Consider the following information: State ofEconomy Probability ofState of Economy Rate of Returnif State Occurs Recession .44 −.13 Boom .56 .25 Calculate the expected return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Over the past 4 years an investment returned 0.1, -0.12, -0.08, and 0.13. What is the standard deviation of returns? (Note: input raw results with four decimal digits, NOT percentage results. For example, input 0.0102 NOT 1.02%)