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- Suppose financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom. The returns on the Supertech Company are expected to follow the economy closely, while the returns on the Slowpoke Company are not. The return predictions are as follows: States of the economy Allos Inc. Returns (RA) Orange Inc. Returns (RB) Depression -20% 5% Recession 10% 20% Normal 30% -12% Boom 50% 9% Required: 1.For each company calculate: i.the expected returns ii.the Variance iii.the Standard deviation 2.For each company calculate and explain: i.The covariance ii.The correlation 3.Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, what will be your portfolio returns? 4.Calculate the Standard deviation of the portfolio.The economy of Pakistan is experiencing lots of fluctuations during the new government. Following information is extracted from a well-known company. State of pakistan economy probability rate of return Depression 10 10.5% Recession 25 5.9% Normal 45 13% Boom 20 21.1% You are required to calculate the following What will be the expected return? Calculate the variance of the above data. Calculate the standard deviation.Suppose financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom. The returns on the Supertech Company are expected to follow the economy closely, while the returns on the Slowpoke Company are not. The return predictions are as follows: States of the economy Depression -20% 5% Recession 10% 20% Normal 30% -12% Boom 50% 9% •Required: 1.For each company calculate: i.the expected returns ii.the Variance iii.the Standard deviation 2.For each company calculate and explain: i.The covariance ii.The correlation 3.Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, what will be your portfolio returns? 4.Calculate the Standard deviation of the portfolio.
- Consider the following information regarding a new investment that a company intends toundertake:.State of the Economy Probability Market Return Investment ReturnExpansion 0.30 40% 60%Normal 0.50 10% 25%Recession 0.20 -15% -40%a). Compute the variance and standard deviation of each b). Compute the correlation between the market the investment return(s) c). Compute the beta of the investment d). Assuming the risk free rate is 5% p.a. Compute the required rate return and advice if the investment is worth undertaken.If the economy is normal, Charleston Freight stock is expected to return 16.5 percent. If the economy falls into a recession, the stock's return is projected at a negative 11.6 percent. The probability of a normal economy is 80 percent while the probability of a recession is 20 percent. What is the variance of the returns on this stock? a. 0.013420b. 0.013927c. 0.010346d. 0.012634The rate of return on the common stock of Kang Distribution is expected to be 13.5 percent in a boom economy, 8 percent in a normal economy, and only 2.5 percent in a recessionary economy. The probabilities of these economic states are 11 percent for a boom and 26 percent for a recession. What is the variance of the returns on this common stock?
- Calculating Returns and Standard Deviations Based on the following information, calculate the expected return andstandard deviation: State of Economy Probability of State of Economy Rate of Return if State Occurs Depression .15 -.148 Recession .30 .031 Normal .45 .162 Boom .10 .348Consider the following information regarding a new investment that a company intends to undertake:. State of the Economy Probability Market Return Investment Return Expansion 0.30 40% 60% Normal 0.50 10% 25% Recession 0.20 -15% -40% a). Compute the variance and standard deviation of eachVariance and standard deviation (expected). Hull Consultants, a famous think tank in the Midwest, has provided probability estimates for the four potential economic states for the coming year. The probability of a boom economy is 13%, the probability of a stable growth economy is 17%, the probability of a stagnant economy is 55%, and the probability of a recession is 15%. Calculate the variance and the standard deviation of the three investments: stock, corporate bond, and government bond. If the estimates for both the probabilities of the economy and the returns in each state of the economy are correct, which investment would you choose, considering both risk and return? Investment Forecasted Returns for Each Economy Boom Stable Growth Stagnant Recession Stock 25% 12% 7% −10% Corporate bond 9% 7% 5% 3% Government bond 8% 6% 4%…
- Based on the following information, what is the variance? State of Economy Recession Normal Boom Probability of State Rate of Return if State Occurs of Economy Multiple Choice O 12749 .03251 01625 02438 .30 .39 .31 -9.80% 11.30% 22.30% ‒‒‒The stock of Tristar Bank will have a loss of 10.8 percent in a slow economy, a return of 10.6 percent in a normal economy, and a return of 24.5 percent in a fast-growing economy. There is 30 percent probability of a slow economy, 39 percent probability of a normal economy, and 31 percent probability of a fast-growing economy. What is the variance of the stock's returns?B.J. Gautney Enterprises is evaluating a security. One-year Treasury Bills are currently paying 2.9%. Calculate the following investment's variance: Probability Return 0.15 -3% 0.3 2% 0.4 4% 0.15 6%