Current Stock Price ($) Stock Price in One Year ($) Return R Probability PR $35 40% 25% $25 $25 0% 50% $20 -20% 25% The variance of the return on Alpha Corporation is closest to:
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Current Stock Price ($)
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Stock Price in One Year ($)
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Return R
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Probability PR
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|
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$35
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40%
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25%
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$25
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$25
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0%
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50%
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|
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$20
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-20%
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25%
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Part 1
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- Use the table for the question(s) below. Consider the following probability distribution of returns for Alpha Corporation: Current Stock Price ($) Stock Price in One Year ($) Return R Probability PR $35 40% 25% $25 $25 0% 50% $20 -20% 25% The variance of the return on Alpha Corporation is closest to: Question content area bottom Part 1 A. 3.75% B. 3.625% C. 4.75% D. 5.00%Find out the 1- standard deviation 2- variance weight Investment*expected return stock weight Investment Investment Amount expected return stock stocks 0.261 1.45 75000 0.18 Alba Co. 0.0504 0.56 75000 0.09 Batelco Co. 0.0371 0.1 75000 0.371 Delmon poultry. 0.3485 225000 TotalThe returns of Shanfari Company are as follows: Year 1=4, Year 2=11, Year3=21, Year 4= (-3). The Average Return and Standard Deviation of Shanfari Company are Select one: a. Average Return=6.75%, Standard Deviation=7.15 b. Average Return=8.25%, Standard Deviation=6.50 c. Average Return=8.25%, Standard Deviation=8.87 d. None of the options e. Average Return=7.45%, Standard Deviation=8.50
- The shares of hypothetical company limited has the following anticipated returns with associated probabilities Return % Probability -20 0.05 -10 0.10 10 0.20 15 0.25 20 0.20 25 0.15 30 0.05 Calculate the expected rate of return, standard deviation, variance coefficient of variationThe monthly rates of return for two corporations are given below:Month ABC Ltd. XYZ Ltd.January -.06 .09February .08 -.04March -.09 -.12April .14 .17May -.02 -.08June .05 .04Compute the following:a. Expected monthly rate of return [E(Ri)] for each stock. b. Standard deviation of returns for each stock. c. The covariance between the rates of return. d. The correlation coefficient between the rates of return.Considering the correlation coefficient, would these two stocks offer a good chance fordiversification? Why or why not?Using the following information for Mcdon, Inc. Stock: Rate of Return Probability Boom 14% 20% Normal 15% 60% Recession (20%) 20% Compute for the following:a) The standard deviationb) The Coefficient of Variation
- Expected return. A stocks returns have the following distribution; Denand for the company’s product Probability of this demand occurring Rate of return if this demand occurs Weak 0.1 (50%) Below average 0.2 (5%) Average 0.4 16 Above average 0.2 25 Strong 0.1 60 1.0 Calculate the stock’s expected return, standard deviation . and the coefficient of variation.The standard deviation of stock returns of Park Corporation is60%. The standard deviation of the market return is 20%. If thecorrelation between Park and the market is 0.40, what is Park’sbeta? (1.2)Calculate the covariance between the following assets [6] State of the world Probability (Pi) Return for stock A Return for Stock B Expansion 0.25 32% 5% Normal 0.50 14% 15% Recession 0.25 4% 25%
- The returns of Mazoon Company is as follows. Year 1=16, Year 2=(-11), Year 3=28, Year4=12. The standard deviation of the company is Select one: a. Mazoon Company =2.44 b. Mazoon Company =4.30 c. Mazoon Company =14.13 d. Mazoon Company =3.5 e. None of the options(c) Consider information given in the table below and answers the question asked thereafter: iv. Calculate covariance and coefficient of correlation between the returns of the stocks A and B.v. Now suppose you have $100,000 to invest and you want to a hold a portfolio comprising of $35,000 invested in stock A and remaining amount in stock B. Calculate risk and return of your portfolio. (d) Firm A reports a Profit Margin of 6.5% and a Total Asset Turnover Ratio of 3.25. Their total asset level is $8,500,000. Assume there are 700,000 shares outstanding and the PE ratio is 11. Also, assume the Return on Equity is 16%. Based on this, calculate the MV/BV ratio.Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA= 4.0% + 0.50RM + eA RB= -1.2% + 0.7RM + eB sigmaM= 17% ; R-squareA = 0.26 ; R-squareB= 0.18 Break down the variance of each stock to the systematic and firm-specific components (write in decimal form, rounded to 4 decimal places). Risk for A Risk for B Systematic Firm-specific