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The price of ABCXYZ123 is currently $40/share. The table below shows the expected dividend per share and price per share under a specific economic condition
The price of ABCXYZ123 is currently $40/share. The table below shows the expected dividend per share and price per share under a specific economic condition after 1 year. The probabilities for the three economic conditions to happen are the same. Boom Normal Recession Dividend $2.00 $1.00 $0.50 Stock Price $50 $43 $34 [a]. What are the expected holding period return and the standard deviation of the holding period return of this stock? [15 points] [b]. Suppose you construct a portfolio consisting of ABCXYZ123 and T-bills. The weights of these two components in the portfolio are the same (i.e. 50% each). What are the expected return and the return standard deviation of this portfolio? (Suppose the expected return on T-bills is 4%.) [5 points)
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