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Question 2 The stock of Gadget Corp sells for $40 a share. Its likely dividend payout and end-of-year price depends on the state of the
Question 2 The stock of Gadget Corp sells for $40 a share. Its likely dividend payout and end-of-year price depends on the state of the economy by the end of the year as follows: The interest rate on the risk-free asset is 4% per year. a) Calculate the expected (one-year) holding-period return of Gadget Plus b) Calculate the standard deviation of the (one-year) holding-period return of Gadget Plus. c) Bob Bruno did not take FIN320 and holds a portfolio invested 60% in Gadget Plus, 40% in the risk-free asset. Calculate: c.1) the expected return of Bob's portfolio; c.2) the standard deviation of Bob's portfolio; c.3) the Sharpe Ratio (aka reward-to-variability ratio) of Bob's portfolio
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