There is 6 percent probability of recession, 21 percent probability of a poor economy, 47 percent probability of a normal economy, and 26 percent probability of a boom. A stock has returns of −20.8 percent, 4.4 percent, 12.2 percent and 27.9 percent in these states of the economy, respectively. What is the stock's expected return?

There is 6 percent probability of recession, 21 percent probability of a poor economy, 47 percent probability of a normal economy, and 26 percent probability of a boom. A stock has returns of −20.8 percent, 4.4 percent, 12.2 percent and 27.9 percent in these states of the economy, respectively. What is the stock's expected return?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 17P

See similar textbooks

Similar questions

There is 11 percent probability of recession, 14 percent probability of a poor economy, 44 percent probability of a normal economy, and 31 percent probability of a boom. A stock has returns of −19.3 percent, 2.9 percent, 10.7 percent and 26.4 percent in these states of the economy, respectively. What is the stock's expected return? Multiple Choice 10.24% 13.30% 15.42% 5.18% 11.18%
A stock will have a loss of 14.6 percent in a recession, a return of 13.3 percent in a normal economy, and a return of 28 percent in a boom. There is 23 percent probability of a recession, 26 percent probability of normal economy, and 51 percent probability of boom. What is the standard deviation of the stock's returns?
A stock is expected to return 13 percent in an economic boom, 10 percent in a normal economy, and 3 percent in a recessionary economy. All else equal, which one of the following will lower the overall expected rate of return on this stock? A decrease in the probability of a recession occurring An increase in the rate of return in a recessionary economy A decrease in the probability of an economic boom
A stock is expected to return 13 percent in an economic boom, 10 percent in a normal economy, and 3 percent in a recessionary economy. Which one of the following will lower the overall expected rate of return on this stock? A. An increase in the rate of return for a normal economy B. A decrease in the probability of a recession occurring C. A decrease in the probability of an economic boom D. No overall change in the rate of return in a recessionary economy
1.Blue Bell stock is expected to return 20% percent in a boom, 10% percent in a normal economy, and lose 2 percent in a recession. The probabilities of a boom, normal economy, and a recession are 7 percent, 89 percent, and 4 percent, respectively. What is the standard deviation of the returns on this stock?
The common stock of Manchester & Moore is expected to earn 16.2 percent in a recession, 8 percent in a normal economy, and lose 3.5 percent in a booming economy. The probability of a boom is 18 percent while the probability of a recession is 7 percent. What is the expected rate of return on this stock?
Blue Bell stock is expected to return 8.4 percent in a boom, 8.9 percent in a normal economy, and 9.2 percent in a recession. The probabilities of a boom, normal economy, and a recession are 6 percent, 92 percent, and 2 percent respectively. What is the standard deviation of the returns on this stock? Can the calculator an excel solution be provided?
Assume the economy has an 6 percent chance of booming, am 8 percent chance of being recessionary, and being normal the remainder of the time. A stock is expected to return 22.5 percent in a boom, 11.5 percent in a normal economy, and −8 percent in a recession. What is the expected rate of return on this stock?
Given the following information, what is the expected return and standard deviation for this stock? State of Economy Probability Of State of Economy Rate of Return Boom 0.40 25% Recession 0.60 5%
A stock is expected to return 11% in a normal economy, 19% if the economy booms, and lose 8% if the economy moves into a recessionary period. Economists predict a 65% chance of a normal economy, a 25% chance of a boom, and a 10% chance of a recession. What is the expected return on the stock?
If the economy booms, Meyer&Co. stock will have a return of 20.9 percent. If the economy goes into a recession, the stock will have a loss of 13.2 percent. The probability of a boom is 62 percent while the probability of a recession is 38 percent. What is the standard deviation of the returns on the stock?
The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to return 23 percent in comparison to 14 percent in a normal economy and a negative 18 percent in a recessionary period. The probability of a recession is 18 percent while the probability of a boom is 22 percent. What is the standard deviation of the returns on this stock?