Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

HELP ME SOLVE ALL THREE IF POSSIBLE, OR JUST SOLVE 1 AND 3 Consider an economy with two types of firms, S and I. S

image text in transcribed

image text in transcribedimage text in transcribedHELP ME SOLVE ALL THREE IF POSSIBLE, OR JUST SOLVE 1 AND 3

Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently of each other. For both types of firm there is a 70% probability that the firm will have a 20% return and a 30% probability that the firm will have a -30% return. The standard deviation for the return on an individual firm is closest to: 0 23.0%. 5.25%. 15.0%. 10.0%. Big Cure and Little Cure are both pharmaceutical companies. Big Cure presently has a potential "blockbuster" drug before the Food and Drug Administration (FDA) waiting for approval. If approved, Big Cure's blockbuster drug will produce $1 billion in net income for Big Cure. Little Cure has 10 separate less important drugs before the FDA waiting for approval. If approved, each of Little Cure's drugs would produce $100 million in net income for Little Cure. The probability of the FDA approving a drug is 50%. What is the standard deviation of Big Cure's average net income for their new blockbuster drug? $0 $1 billion $100 million 0 $500 million Use the following information to answer the question(s) below. Ticker Beta F 2.77 Company Ford Motor Company International Business Machines IBM 0.73 Merck MRK 0.90 If the expected return on the market is 11% and the expected return of investing in Merck is 10.35%, then the risk-free rate must be: 3.0%. 4.0%. 4.5%. 5.0%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance

Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes

7th Edition

0072866578, 9780072866575

More Books

Students also viewed these Finance questions

Question

Write a note on transfer policy.

Answered: 1 week ago

Question

Discuss about training and development in India?

Answered: 1 week ago

Question

Explain the various techniques of training and development.

Answered: 1 week ago

Question

Explain the various techniques of Management Development.

Answered: 1 week ago