Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please show all work including any formulas and explanations 2. Delta Airlines is reporting its first quarter earnings next Wednesday April 15th before the market

please show all work including any formulas and explanations
image text in transcribed
2. Delta Airlines is reporting its first quarter earnings next Wednesday April 15th before the market open. As such, Walker is forecasting DAL's one-week return, assuming that he is holding DAL today until Wed 4-15. Given the coronavirus crisis, Walker estimates that there is 10% chance that DAL will beat analysts' forecast. In this case, DAL will experience a 15% increase in return. On the other hand, there is 50% chance that DAL will meet the forecast and experience a 5% increase in return. If DAL's earnings are worse than expected and the company misses analysts' estimates, the stock will experience a 12% drop. In such case, Walker estimates that the likelihood to missing analysts' estimates is 40%. Calculate the expected risk (via standard deviation) and return (via mean or expected return) for Delta Airlines given the above pay off and probability

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

Students also viewed these Finance questions