Question
Please calculate the expected value and standard deviation of firm A' ROA. [Subject: Corporate Finance] Probability Firm A'ROA 40% 20% 40% 10% 20% -20% Firm
Please calculate the expected value and standard deviation of firm A' ROA. [Subject: Corporate Finance]
Probability | Firm A'ROA |
40% | 20% |
40% | 10% |
20% | -20% |
Firm A' profitability (ROA) next year is uncertain. Assuming that we know that in bull market condition, the ROA is 20%. In normal condition, ROA is 10% and in bear market condition, ROA can be -20%. Each market condition occurs at different probability. Please refer to the table to find the probability for each market condition.
Even though we don't know which market condition will occur in the future, but we can know on average, the ROA can be what % in the future (expected value of ROA). In addition, we can also calculate the volatility of ROA (up and down of ROA).
Please calculate the 1. The expected ROA for firm A is ( )%.
(Round to whole number. If your answer is 8.3%, please put 8 in the blank If your answer is 8.6%, then put 9 in the blank )
2. The standard deviation of ROA is ( )%
(Round to whole number. If your answer is 8.3%, please put 8 in the blank If your answer is 8.6%, then put 9 in the blank )
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started