Question
You are given that T-bill rate is 3.6 percent. You are also given the following probability distribution of returns for Stock X. Calculate the risk
You are given that T-bill rate is 3.6 percent. You are also given the following probability distribution of returns for Stock X. Calculate the risk premium of stock X.
| State of Economy | Probability of State | Stock X Return |
| Boom | 0.30 | 50% |
| Normal | 0.25 | 20% |
| Slow Down | 0.25 | 10% |
| Recession | 0.20 | -20% |
| A. | 14.9 percent | |
| B. | 17.2 percent | |
| C. | 18.5 percent | |
| D. | 13.6 percent |
You are given that T-bill rate is 3.6 percent. You are also given the following probability distribution of returns for Stock X. Calculate the risk premium of stock X.
| State of Economy | Probability of State | Stock X Return |
| Boom | 0.30 | 50% |
| Normal | 0.25 | 20% |
| Slow Down | 0.25 | 10% |
| Recession | 0.20 | -20% |
| A. | 14.9 percent | |
| B. | 17.2 percent | |
| C. | 18.5 percent | |
| D. | 13.6 percent |
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Principles Of Finance
Authors: Scott Besley, Eugene F. Brigham
2nd Edition
003034509X, 9780030345098
