Q1) There is a 47.00% probability of a below average economy and a 53.00% probability of an average economy. If there is a below average economy stocks A and B will have returns of -1.90% and 10.00%, respectively. If there is an average economy stocks A and B will have returns of 5.60% and -6.70%, respectively. Compute the: a) Expected Return for Stock A (0.75 points) b) Expected Return for Stock B (0.75 points) c) Standard Deviation for Stock A (0.75 points): d) Standard Deviation for Stock B (0.75 points): INSTRUCTIONS Q2) There is a 45.60% probability of an average economy and a 54.40% probability of an above average economy. You invest 32. 30% of your money in Stock S and 67.70% of your money in Stock T. In an average economy the expected returns for Stock Sand Stock T are 8.40% and 9.50%, respectively. In an above average economy the the expected returns for Stock S and T are 11.80% and 12.40% respectively. What is the expected return for this two stock portfolio? (2 points) Q3) You are invested 15.00% in growth stocks with a beta of 1.73, 21.10% in value stocks with a beta of 1.42, and 63.90% in the market portfolio. What is the beta of your portfolio? (1 point) For the final answers, round your answer to the nearest 4 decimal places (3 decimals for the reward-to-risk ratio and 2 for the beta-coefficient). If you need to use a calculated number for further calculations, DO NOT round until after all calculations have been completed Q4) An analyst gathered the following information for a stock and market parameters: stock beta = 1.31; expected return on the Market = 12.10%; expected return on T-bills = 1.10%; current stock Price = $8.86; expected stock price in one year = $12.66; expected dividend payment next year = $1.54. Calculate the a) Required return for this stock (1 point): b) Expected return for this stock (1 point): Q5) The market risk premium for next period is 7.90% and the risk-free rate is 1.80%. Stock Z has a beta of 0.70 and an expected return of 10.70%. What is the a) Market's reward-to-risk ratio? (1 point): b) Stock Z's reward-to-risk ratio (1 point): Q1) There is a 47.00% probability of a below average economy and a 53.00% probability of an average economy. If there is a below average economy stocks A and B will have returns of -1.90% and 10.00%, respectively. If there is an average economy stocks A and B will have returns of 5.60% and -6.70%, respectively. Compute the: a) Expected Return for Stock A (0.75 points) b) Expected Return for Stock B (0.75 points) c) Standard Deviation for Stock A (0.75 points): d) Standard Deviation for Stock B (0.75 points): INSTRUCTIONS Q2) There is a 45.60% probability of an average economy and a 54.40% probability of an above average economy. You invest 32. 30% of your money in Stock S and 67.70% of your money in Stock T. In an average economy the expected returns for Stock Sand Stock T are 8.40% and 9.50%, respectively. In an above average economy the the expected returns for Stock S and T are 11.80% and 12.40% respectively. What is the expected return for this two stock portfolio? (2 points) Q3) You are invested 15.00% in growth stocks with a beta of 1.73, 21.10% in value stocks with a beta of 1.42, and 63.90% in the market portfolio. What is the beta of your portfolio? (1 point) For the final answers, round your answer to the nearest 4 decimal places (3 decimals for the reward-to-risk ratio and 2 for the beta-coefficient). If you need to use a calculated number for further calculations, DO NOT round until after all calculations have been completed Q4) An analyst gathered the following information for a stock and market parameters: stock beta = 1.31; expected return on the Market = 12.10%; expected return on T-bills = 1.10%; current stock Price = $8.86; expected stock price in one year = $12.66; expected dividend payment next year = $1.54. Calculate the a) Required return for this stock (1 point): b) Expected return for this stock (1 point): Q5) The market risk premium for next period is 7.90% and the risk-free rate is 1.80%. Stock Z has a beta of 0.70 and an expected return of 10.70%. What is the a) Market's reward-to-risk ratio? (1 point): b) Stock Z's reward-to-risk ratio (1 point)
