Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your stockbroker has called to tell you about two stocks: Amazon.com, Inc. (AMZN) and Netflix, Inc. (NFLX). She tells you that AMZN is selling for

Your stockbroker has called to tell you about two stocks: Amazon.com, Inc. (AMZN) and Netflix, Inc. (NFLX). She tells you that AMZN is selling for $3,175.00 per share and that she expects the price in one year to be $3,800.00. NFLX is selling for $515.00 per share and she expects the price in one year to be $550.00. The expected return on AMZN has a standard deviation of 30 percent, while the expected return on NFLX has a standard deviation of 20 percent. The market risk premium for the S & P 500 has averaged 6.5 percent. The beta for AMZN is 1.20 and the beta for NFLX is .93. The 10-year Treasury bond rate is currently 1.00%. Neither AMZN nor NFLX pays a cash dividend. Required: b) Determine the probability for each stock that you would earn less than your required rate of return.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Millionaire By Thirty The Quickest Path To Early Financial Independence

Authors: Douglas R. Andrew, Emron Andrew, Aaron Andrew

1st Edition

0446501840, 978-0446501842

More Books

Students also viewed these Finance questions