Expected Return: Discrete DistributionA stock's return has the following distribution:Demand for the Company's ProductsProbability of This Demand OccurringRate of Return if This Demand Occurs (%) Weak0.1-25% Below average0.2-8 Average0.47 Above average0.235 Strong0.160 1.0 Calculate the stock's expected return. Round your answer to two decimal places.___%Calculate the standard deviation. Round your answer to two decimal places.___%

Calculation of expected return and standard deviation:The stock’s expected return is 11.70% and the…

Answered: Expected Return: Discrete Distribution…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 17P

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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?
The standard deviation of stock returns for Stock A is 40%. The standard deviation of the market return is 20%. If the correlation between Stock A and the market is 0.70, then what is Stock A’s beta?
Investment advisors estimated the stock market returns for four market segments: computers, financial, manufacturing, and pharmaceuticals. Annual return projections vary depending on whether the general economic conditions are improving, stable, or declining. The anticipated annual return percentages for each market segment under each economic condition are as follows: Assume that an individual investor wants to select one market segment for a new investment. A forecast shows improving 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? At a later date, a revised forecast shows a potential for an improvement in economic conditions. New probabilities are as follows: improving (0.4), stable (0.4), and declining (0.2). What is the preferred market segment for the investor based on these new probabilities? What is the expected return percentage?

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Demand for the Company's Products	Probability of This Demand Occurring	Rate of Return if This Demand Occurs (%)
Weak	0.1	-25%
Below average	0.2	-8
Average	0.4	7
Above average	0.2	35
Strong	0.1	60
	1.0