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1. You have estimated the following probability distributions of expected future returns fo stocks A and B Stock A Stock B Probability Probability Return -10%
1. You have estimated the following probability distributions of expected future returns fo stocks A and B Stock A Stock B Probability Probability Return -10% 10% 15% 20% 40% Return 0.1 0.2 0.4 0.2 0.1 0.2 0.2 0.3 0.2 0.1 2% 7% 12% 15% 165 a. What is the expected return of stock A?(25 points) b. What is the expected return of stock B? (25 points) 2. Given a risk-free rate (Rf) of 6 percent and a market risk premium (Rm-Rf) of 8 percent, calculate the required rate of return on each of the following stocks: a. American Electric Power (beta 0.65) b. Citigroup (beta 2.05) c. General Mills (beta 0.50) d. Wynn Resorts (beta 1.80) e. JPMorgan Chase (beta 1.25)
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