Fox river company is analysing a new line of business and estimates the possible return on investments as; Probability 0.1 0.2 0.4 0.2 0.1 Possible returns(%) -10 5 20 35 50 What is; a)the expected return b)standard deviation
Q: ou are a consultant to a firm evaluating an expansion of its current business. The cash-flow…
A: Cost of capital computed by using CAPM formula: Cost of capital = Risk free rate + Beta ×(Expected…
Q: Probability
A: Expected Rate of Return- E(r) from the portfolio is the total rate of return the investor expects to…
Q: what is the net present value of the project?
A: Net Present Value: It is a measure of absolute profitability used in capital budgeting. Thus, it is…
Q: (a) What is meant by the term correlation? What is meant by the term diversification? (b) Suppose…
A: Corrleation for second part is 0.96 To Find: Expected return Standard deviation
Q: Consider that an investor has a total of £300,000 to invest. The investor invested £200,000 in asset…
A: Portfolio standard deviation formula: Value at Risk is calculated by standard deviation of…
Q: Following information is given from the books of Al Hamid Investment Services. The expected market…
A: According to CAPM expected return can be calculated from risk free rate and market risk premium.
Q: c. If the historical annual returns of an Investment in various Economic Conditions (with their…
A: Expected return on the investment = (Poor condition return x Probability) + (Normal condition return…
Q: Qarshi Industries is a very well-profiled Company in financial markets of Pakistan. The company is…
A: Since more than three parts are asked at a time the answer for first three sub-parts are only…
Q: Economic Condition Market Segment Improving Stable Declining Computers Financial Manufacturing…
A: EXPECTED RETURN FORMULA: Expected return=∑nrn×pn where, n=number of scenario r=return p=probability
Q: Assume that Conrado Corporation is considering the possible rates of return it might earn next year…
A: Because you have asked question with multiple parts (MULTI PART) , we will solve the first 3 parts…
Q: 'ou are a consultant to a firm evaluating an expansion of its current business. The cash-flow…
A: Net present value is difference between present value cash flow and initial investment.
Q: Assume that Conrado Corporation is considering the possible rates of return it might earn next year…
A: Because you have asked question with multiple parts (MULTI PART) , we will solve the first 3 parts…
Q: An investor holds a portfolio of stocks and is considering investing in the DBB Company. The firm's…
A: Hi, since you have posted a question with multiple sub-parts, we will answer the first 3 as per…
Q: Your expectations from a one year investment in Wang Computers are as follows:…
A: Given: Given:
Q: Anjelo Jonathan a financial analyst for Blues Industries, wishes to estimate the rate of return for…
A: Rate of return is help to calculate the net gain and loss from the investment. In this we consider…
Q: You are a consultant to a firm evaluating an expansion of its current business. The cash-flow…
A: Initial investment (I) = $100 million Annual cashflow (A) = $15 million n = 10 years Let r = IRR
Q: In a perfect world where asset return is normally distributed. We have risk and return…
A: Here, Assets ABC DEF Market portfolio Expected Return 10% 15% 5% Standard Deviation 20% 40%…
Q: There are three possible states of economy-Boom, Growth or Recession and the returns on Ihser and…
A: When investor invest his money, he assumes to earn something on his investment for the period of…
Q: Based on the following table, which option gives you highest risk-adjusted returns? Note you don't…
A: a) Sharpe Ratio: Sharpe Ratio is used to measure return earned in excess of the risk-free return per…
Q: The possible rates of return of two assets, A and B, under different economic conditions are given…
A: Different assets have different level of risk and return. Investor analysis the risk involved in…
Q: Consider information given in the table below and answers the question asked thereafter: iv.…
A: Hi, since multiple questions are posted will answer the first one. Covariance determines the degree…
Q: Piedmont Hotels is an all-equity company. Its stock has a beta of 1.33. The market risk premium is…
A: The required rate of return can be calculated with the help of CAPM equation after adjusting for…
Q: Consider the two risky investments below: Scenario Asset 1 Asset 2 Probability | Returns 0.1…
A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…
Q: The following data represent the probability distribution of the holding period returns for an…
A: Expected return = (R1 * P1) + (R2 * P2) + (R3 * P3) Where : R1 = Rate of return 1 P1 = Probability…
Q: The following investments and probabilities are presented:…
A: An investor can determine the performance and riskiness of investment by evaluating expected return,…
Q: Chevron-Phillips requires a real return of 14.2%. If inflation is running 3.8%, what must be their…
A: Formula to calculate the MARR or the hurdle rate is: Real rate = Nominal rate - Inflation rate
Q: An investor holds a portfolio of stocks and is considering investing in the DBB Company. The firm’s…
A: Here,
Q: 14. SNOFI Inc.'s manager believes that economic conditions during the next year will be strong,…
A: Expected return refers to the anticipated amount of profit or loss that an investor calculates from…
Q: You are a consultant to a firm evaluating an expansion of its current business. The cash-flow…
A: A method of capital budgeting that helps to evaluate the present worth of cash flow and a series of…
Q: An analyst believes that economic conditions during the next year will either be strong, normal, or…
A: Expected return =P1*R1 +P2*R2+.......+Pn*Rn where P1,P2,Pn = Probability R1,R2,Rn =return
Q: Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds…
A: Expected Return is average return that investor can earn considering different probabilities and…
Q: Being Finance Manager of Salalah Textiles Industries, you need to invest an amount for OMR 50,000 in…
A: Capital asset pricing model is the model that depicts the relationship between the systematic risk…
Q: Diamond Drillers is planning to use retained earnings to finance anticipated capital expenditures.…
A: The cost of retained earnings can be computed using the CAPM. The flotation costs are not considered…
Q: You are a consultant to a firm evaluating an expansion of its current business. The cash-flow…
A: Answer and calculations are given below
Q: Consider an investor who wishes to invest 40% to defensive investments and 60% allocation to growth…
A:
Q: a. Calculate both the arithmetic and the geometric average return of the following investment; Year…
A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…
Q: An investment analyst estimates the following probabilities of return depending on the state of the…
A: Expected return of a portfolio is the weighted average of the return of the individual securities.…
Q: You are trying to develop a strategy for investing in two different stocks. The anticipated annual…
A: The probability distribution is: Probability Stock X Stock Y 0.1 -130 -150 0.2 20 50 0.4…
Q: Felix is estimating the return for Togo Sledding and has determined the following probabilities and…
A: The rate of return that an investor is estimates to earn from the investment is term as the expected…
Q: Consider the two risky investments below: Scenario Asset 1 Asset 2 Probability Returns 0.1…
A: Part 2 of the questio is : What is the difference between systematic and non-systematic risk. There…
Q: You have assigned the following values to these three firms: Price Upcoming Dividend…
A: The formula to calculate required return using CAPM model is given below:
Q: ments, X and Y. If each investment is carried out, there are four pos outcomes. The present value of…
A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: 9. Consider the case of two financial assets and three market conditions (states). The table below…
A: The question is related Portfolio Management. The expected return is calculated with the help of…
Q: You have inherited some funds and decided to invest in one of two international companies – Coca…
A: Ai. Calculation of Expected rate of return for Coca Cola andWalmart…
Q: The Curry Company is analyzing two capital investments. The financial vice president insists on…
A: Company should chose Project Y.
Q: Hailey has identified two companies, Urban Foodies and Wicked Chef, as possible investments. She has…
A: Here, Economic conditions Probability of the economic state occurring Rate of…
Q: An investment analyst estimates the following probabilities of return depending on the state of the…
A: Step1: Risk Risk: It refers to an outcome of uncertainty, which is non-predictable in nature. In…
Fox river company is analysing a new line of business and estimates the possible
Probability 0.1 0.2 0.4 0.2 0.1
Possible
returns(%) -10 5 20 35 50
What is;
a)the expected return
b)standard deviation
Step by step
Solved in 2 steps with 2 images
- 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?What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Buy a stock for $30 a share, hold it for three years, and then sell it for $60 a share (the stock pays annual dividends of $2 a share). Buy a security for $40, hold it for two years, and then sell it for $100 (current income on this security is zero). Buy a one-year, 5 percent note for $1,000 (assume that the note has a $1,000 par value and that it will be held to maturity).The following data represent the probability distribution of the holding period returns for an investment in Lazy Rapids Kayaks (LARK) stock. State of the Economy Scenario #(s) Probability, p(s) HPR Boom 1 0.348 31.60% Normal growth 2 0.432 6.90% Recession 3 0.220 -19.20% a. What is the expected return on LARK? (Round your answer to 2 decimal places.) b. What is the standard deviation of the returns on LARK? (Round your answer to 2 decimal places.)
- Suppose that an investor has a chance of investing 90% fund in A with the remainder 10% purchasing shares in B. The returns on these companies respond differently to the general activity within the economy. Calculate the expected returns and standard deviation for this two-asset profolio. Event i State of thye economy Probability Pi Return on A RA Return on B RB Boom 0.3 20% 3% Growth 0.4 10% 35% Recession 0.3 0% -5%Suppose that your estimates of the possible one-year returns from investing in the common stock of the AYZ Corporation were as follows: Probability of occurrence 0.15 0.25 0.3 0.15 0.15 Possible return -10% 5% 20% 35% 50% What are the expected return? Calculate the standard deviation?Consider a position consisting of a $315,380 investment in Oracle Corporation (ORCL) and a $271,440 investment in NVIDIA Corporation (NVDA). Suppose that the daily volatilities of these two assets are 4.14% and 5.71% respectively and that the coefficient of correlation between their return is 0.6778. With an assumption that it follows the normally distributed returns, the 27-day 99% Value at Risk (VaR) for NVIDIA Corporation (NVDA) is closest to A. $187,355.52. B. $157,830.54. C. $124,900.63. D. $100,900.64.
- Consider a position consisting of a $65,080 investment in Shin’s Korean Technology (SHIT) and a $22,210 investment in Coca-Cola Company (KO). Suppose that the daily volatilities of these two assets are 2.14% and 2.71% respectively and that the coefficient of correlation between their return is 0.4168. With an assumption that it follows the normally distributed returns, the 32-day 95% Value at Risk (VaR) for Shin’s Korean Technology (SHIT) is closest to A. $16,620.41. B. $14,816.56. C. $12,958.76. D. $10,007.37.The 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=8.50Consider the case of two financial assets and three market conditions (states). The tablebelow gives the respective probability for each market condition and the return of each assetin each one of them. Market Conditions State Recession Normal Expansion Probability of state 30% 40% 30% Return of asset A -30% 20% 55% Return of asset B -10% 70% 0% Consider the portfolio with 50% investment in each of the two assets above. Calculatethe expected return and the standard deviation of the portfolio.
- Consider a position consisting of a K200,000 investment in Asset A and a K300,000 investment in Asset B. Assume that the daily volatilities of the assets are 1.5% and 1.8% respectively, and that the coefficient of correlation between their returns is 0.4. What is the five day 95% Value at Risk (VaR) for the portfolio (95% confidence level represents 1.65 standard deviations on the left side of a normal distribution)?WINNER plans to invest in one of two stocks, each of which requires the same initial investment. The estimated return (cash flow) of these investments for the next year depends on economic conditions and their respective possibilities. State of Economy Probability Rate of Return Stock A Stock B Boom 0.15 0.30 0.25 Normal 0.55 0.12 0.08 Recession 0.30 0.01 -0.05 i) Compute expected rate of return for each asset. ii) Compute variance and standard deviation of rate of return for each asset. iii) Which asset should they purchase?Here are data on two companies. The T-bill rate is 4% and the market risk premium is 6%. Company $1 Discount Store Everything $5 Forecasted return 12% 11% Standard deviation of returns 8% 10% Beta 1.5 1.0 What would be the fair return for each company according to the capital asset pricing model (CAPM)?
