Question: What is the expected rate of return on the project? What is the project's standard deviation of returns in the previous question? Given the previous

What is the expected rate of return on the project?

What is the project's standard deviation of returns in the previous question?

Given the previous two questions, what is the project's coefficient of variation (CV) of returns?

Data

State of the	Probability	Rate of
economy	of occurrence	return
Poor	0.3	-20%
Average	0.45	10%
Good	0.25	30%

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

SOLUTION To calculate the expected rate of return on the project we multiply the rate of return in each state of the economy by its corresponding prob... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Sligo Toys Ltd manufactures wooden toy figures at its Ballinode plant. It has two departments - the Forming Department and the Finishing Department. (Exercises 4.21 and 4.22 focused on the Forming...

Assume that you recently graduated with a major in finance. You just landed a job as a financial planner with Merrill Finch Inc., a large financial services corporation. Your first assignment is to...

a. 1. Why is the T-bills return independent of the state of the economy? Do T-bills promise a completely risk-free return? Explain. 2. Why are High Techs returns expected to move with the economy,...

Assume that you recently graduated with a major in finance and that you just landed a job as a financial planner with Barney Smith Inc., a large financial services corporation. Your first assignment...

A venture investor, BKAngel, is considering investing in a software venture opportunity. However, the rate of return to be realized next year is likely to vary with the economic climate that actually...

Given her evaluation of current economic conditions, Ima Nutt believes there is a 20 percent probability of recession, a 50percent chance of continued steady growth, and a 30 percent probability of...

The annual return on each of four stocks for each of the next five years is assumed to follow a normal distribution, with the mean and standard deviation for each stock, as well as the correlations...

Now assume that the stock is currently selling at $30.29. What is the expected rate of return on the stock? MINI CASE Sam Struthers and Shawna Tibbs are senior vice presidents of the Mutual of...

According to CAPM, the expected rate of return of a portfolio with a beta of 1.0 and an alpha of 0 is: a. Between rM and rf . b. The risk-free rate, rf. c. Î²( rM - rf ). d. The expected...

Define the following terms, using graphs or equations to illustrate your answers wherever feasible: a. Stand-alone risk; risk; probability distribution b. Expected rate of return, r c. Continuous...

Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average stock is 13 percent, and the risk-free rate of return is 7 percent. By how much does the required...

#1 (6 pts) We are given the following information about the function f : 6 ; f(0) = 2. X+1 (I) We will construct a continuous piece = wise linear function, g, an approximation of f on the interval...

You need to read the following and Response Paper: A Good Man is Hard to Find by Flannery OConnor

Decisions taken by leaders have what kind of effect on an organization

In an insulated vessel, 250 g of ice at 0C is added to 600 g of water at 18.0C. (a) What is the final temperature of the system? (b) How much ice remains when the system reaches equilibrium?

In Figure P20.40, the change in internal energy of a gas that is taken from A to C is "800 + J. The work done on the gas along path ABC is - 500 J. (a) How much energy must be added to the system by...

In Figure 2.10b, the area under the velocity versus time curve and between the vertical axis and time t (vertical dashed line) represents the displacement. As shown, this area consists of a rectangle...

In an experimental house, Styrofoam beads were pumped into the air space between the panes of glass in double windows at night in the winter, and pumped out to holding bins during the day. How would...

In describing his upcoming trip to the Moon, and as portrayed in the movie Apollo 13 (Universal, 1995), astronaut Jim Lovell said, Ill be walking in a place where theres a 400-degree difference...

Let y=arctan(x9). Write sec(y) as an expression in terms of x.81-x229981x2281x22x981-x2281x229None of these.

Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the...

Baxley Brothers has a DSO of 23 days, and its annual sales are $3,650,000. What is its accounts receivable balance? Assume that it uses a 365-day year.

A firm has been experiencing low profitability in recent years. Perform an analysis of the firms financial position using the DuPont equation. The firm has no lease payments but has a $2 million...

Explain why a simulation model with only discrete probability distributions produces the same results as the corresponding decision tree model even though it uses very different solution methods.

Explain why in decision analysis we are concerned with the expected value of information.

If you were to make Leah Sanchezs decision of how many calendars to order, what order amount would you chose? Why?