Question
Suppose you see the following projections for two stocks. Assume that you know the following 12-month returns. State of Durable good Sales Probability of State
Suppose you see the following projections for two stocks. Assume that you know the following 12-month returns.
| State of Durable good Sales | Probability of State | Return on Stock A | Return on Stock B | Market Return |
| Very Strong | .15 | 0.22 | 0.24 | 0.19 |
| Strong | .15 | 0.14 | 0.11 | 0.11 |
| Normal | .55 | 0.11 | 0.04 | 0.06 |
| Weak | .15 | -0.17 | -0.09 | -0.11 |
a) Calculate the mean return of each companys stock.
b) Calculate the standard deviation of each companys stock.
c) Calculate the market beta for each companys stock.
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Valuation, Measuring And Managing The Value Of Companies
Authors: Tim Koller, Marc Goedhart, David Wessels
7th Edition
1119611865, 9781119611868
