You build a binomial model with one period and assert that over the course of a year, the stock price will either rise by a factor of 1.5 or fall by a factor of 2/3. What is your implicit assumption about the volatility of the stock’s rate of return over the next year?

Q: During the coming year, the market risk premium (rm− rf), is expected to remain the same, while the…

A: The question is based on the concept of Financial analysis

Q: Which of the following statements is CORRECT? If a stock's dividend is expected to grow at a…

A: First statement: If stock dividend is grow at 6% means stock price increase by 6%. Investor will get…

Q: Given the following​ holding-period returns, LOADING... ​, compute the average returns and the…

A: Given: Risk free rate 6%   Beta 1.87   Month Zemin Corp Market 1 5% 6% 2 2% 1% 3 2% 0%…

Q: What is the expected rate of return and standard deviation on this stock?

A: The expected rate of return is a statistical degree used for studying the portfolio. It is the…

Q: Stocks C and F have the following historical returns:   Year                            return…

A: Since you have posted multiple sub parts we will answer the first three parts for you. If you want…

Q: You have the following price for a stock for several recent years. Assume that the stock F year…

A: Here, F year               Begining of year price                   # of shares bought or sold 2005…

Q: Suppose the returns on a small stock are normally distributed. The historical average return is 18…

A: a) Z score = (expected return - actual return) / Standard Deviation Z score = (18%-12%)/6% Z score =…

Q: Suppose you own Stocks A and B. Based on data over the past decade, the Sharpe ratiofor Stock A is…

A: The excess amount of return with regards to risk per unit is more in Stock A as stock A’s Sharpe…

Q: A stock is currently trading at $57 and we assume a three-period binomial tree model where each…

A: The following flow chart shows the price up and drop in the stock :

Q: You are thinking of buying a stock priced at $106 per share. Assume that the risk-free rate is about…

A: according to CAPM: Rstock =rf+β×rm-rfwhere,rf= risk free raterm= market return

Q: Based on current dividend yields and expected growth rates, the expected rates of return on stocks A…

A: Given that;For stock A:Expected return is 11%Standard deviation is 10% Beta is 0.8

Q: Consider a stock currently trading at $10, with expected annual return of 15% and annual volatility…

A: Current Stock price is $10 Expected annual return is 15% Annual Volatility is 0.2 To Find:…

Q: For the coming year you have determined that the following possibilities are most likely for stock…

A: Working of the expected return on the stock A is shown:

Q: You are holding a stock which has a beta of 2.0 and is currently in equilibrium. The required return…

A: First we need to find out the risk free rate by using CAPM formula rs =Rf +β*(Rm -Rf) rs =Required…

Q: A stock with a beta of 1.2 has an expected rate of return of 14%. If the market return this year…

A: Stock return = Expected rate of return + beta (Market premium)

Q: Which stock should have a higher actual return next year

A: The beta of a stock is the degree of responsiveness to movements in price with changes in the stock…

Q: Which of the two stocks is riskier? Why?   Which of the stocks is expected to yield a higher return?…

A: 1) Computation: Step 2 Hence, stock B is riskier than stock A.

Q: You are thinking of buying a stock priced at $98 per share. Assume that the risk-free rate is about…

A: Holding period return = Dividend paid + ( Price at year 1 - Price at year 0 ) / Price at year 0

Q: A stock with a beta of 1.6 has an expected rate of return of 15%. If the market return this year…

A: The beta of security measures the volatility of the security return in relation to the market…

Q: A stock with a beta of 1.8 has an expected rate of return of 16%. If the market return this year…

A: Expected rate of return is 16%. When market return turns out to be 6% below expected, then the…

Q: geometric

A: Introduction: The term geometric mean refers to investment's average growth. In other words it is…

Q: 1) Consider two stocks A and B and their returns are assumed to be normally distributed. Over the…

A: As per the honor code, We’ll answer the first question since the exact one wasn’t specified. Please…

Q: A stock has the following returns over a 3 year period: 25%, -4%, 8%. What is this stock's geometric…

A: Geometric Average Return is the actual annual return of an investment earned during a certain period…

Q: - Calculate the average rate of return for each stock during the period 2x15 through 2x19. Assume…

A: Realized return of a portfolio means that return which is going to be received from the portfolio.…

Q: You have been following a stock for 6 months and the following is its past return   Year 1: -5%…

A: Expected return and standard deviation of a stock can be calculated using the below formula.…

Q: Consider the following probability distribution of returns for Alpha Corporation: Current Stock…

A: Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: If the risk free rate is 4 %, the expected return on the market portfolio is 1296 and the beta of…

A: Financial management consists of directing, planning, organizing and controlling of financial…

Q: A stock with a beta of 1.8 has an expected rate of return of 16%. If the market return this year…

A: Formula to calculate   Best guess as to Rate of return = Expected rate of return + beta (Market…

Q: The return pattern on your favorite stock has been 5.39%, 8.26%, -12.04%, and 14.27% over the last…

A: In the given question we need to calculate average arithmetic and geometric rates of return from the…

Q: You know that the prices on a stock market follow a lognormal geometric random walk. Given the…

A: Expected log returns are calculated by taking natural log of expected returns. It shows more…

Q: What is the expected return on Verdoni’s stock?

A: The expected return is the return expected by the investors on their investment. It is the…

Q: A stock recently has been estimated to have a beta of 1.24:a. What will a beta book compute as the…

A: Part (a): Answer: Adjusted beta is 1.16

Q: Suppose that your estimates of the possible one-year returns from investing in the common stock of…

A: A statistical measure that represents the variation in the return on the stock is term as the…

Q: A. If a stock costs $55 one month and drops to $45 the next month, what is the expected stock price…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: You are analyzing a stock that has a beta of 1.65 over the past year. If the stock market goes down…

A: The measure of stock's volatility with the overall market is called beta. It is used in the capital…

Q: You are considering the purchase of a share. The following table shows the possible returns from the…

A: Standard deviation of a stock denotes the deviation for the return of stock. The deviations can be…

Q: A stock with a beta of 0.9 has an expected rate of return of 10%. If the market return this year…

A: The question can be answered by determining the return for the stock using the capital asset pricing…

Q: A challenge we run into when forecasting future stock returns is that stock returns compound. So,…

A:

Q: Two common stocks, Consolidated Edison and Apple, have the following expected return and standard…

A: Given:

Q: A stock with a beta of 1.5 has an expected rate of return of 15%. If the market return this year…

A: Beta can be described as the volatility of a stock compared to the market, which basically means how…

Q: Consider a stock where the current price is Ksh.120, the expected return is 20% per annum, and the…

A: The question is based on the concept of  probability distribution over a year in continuous…

Q: American

A: Formula to calculate the risk neutral probability is: p = e^rh - d         u - d

Q: A stock's initial value was $ 15 and the value after two years is $25. a. Find out the holding…

A: Given: Initial Value = $15 Value after 2 years = $25 Number of period = 2 Holding period return…

Q: The last four years of returns for a stock are as follows: Year 3 4 Return - 4.3% 28.1% 12.3% 3.9%…

A: Year Return 1 -4.3% 2 28.1% 3 12.3% 4 3.9%

Q: You expect HGH stock to have a 20% return next year and a 45% volatility. You have $25,000 to…

A: Volatility Volatility indicates the pricing behavior of the security  is indicated by volatility.…

Q: Which of the following statements is CORRECT? If a stock's dividend is expected to grow at a…

A: The fair value of a company is determined using the dividend growth model, a valuation method that…

Q: We assume that the stochastic process for a stock price is an Arithmetic Brownian motion, with a…

A: Probability is simply the likelihood of something occurring. When one is uncertain about the result…