Question 1

A stock has the following probability distribution: If economy is good (the probability is 20%), its expected stock return is 20%; if economy is on average (the probability is 60%), its expected stock return is 10%; if economy is bad (the probability is 20%), its expected return is -20%. Find the expected rate of return for the stock ______

Answers : 6.0%

(20*20) + (60*10) + (20*(-20) = 6.0 %

Question 2

Using the data from Question 1, find the standard deviation (risk) for the stock ______

Answers: 13.56% (how to get this answer)

Question 3

A firm has issued a bond. The bond has a 12% coupon, paid semiannually, a current maturity of 20 years, and sell for $1,171.59. The firm's marginal tax rate is 40%. What's the firm's after-tax component cost of debt?

AnsAnswers: 6.00% (how to get this answer)