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You are given the following information: State of Economy Return on Stock A Return on Stock B Bear .107 −.050 Normal .110 .153 Bull .078 .238 Assume each state of the economy is equally likely to happen. Calculate the expected return of each of the following stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return Stock A % Stock B % Calculate the standard deviation of each of the following stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Standard deviation Stock A % Stock B % What is the covariance between the returns of the two stocks? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 6 decimal places, e.g., 32.161616.) Covariance What is the correlation between the returns of the two stocks? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) Correlation
A new product may be a dud (20% probability), an average seller (70% probability), or dynamite (10% probability).- what are the promised and expected rates of return?
Bond A pays $8,000 in 20 years. Bond B pays $8,000 in 40 years. (To keep things simple, assume these are zero-coupon bonds, which means the $8,000 is the only payment the bondholder receives.)
You would be making a wise decision if you chose to: invest in an account paying 6 percent, compounded quarterly, rather than an account paying 6 percent, compounded monthly. ignore the effective rates and concentrate on the annual percentage rates f..
If Chemical Bank is successful in getting Microsoft to convert a $2 million demand deposit to a Eurodollar deposit, how much can Chemical Bank lend out because of this transaction?
For the purpose of estimating VaR, you computed the critical adverse change in a 5-year interest rate (delta r-star in the VaR formula) to be 0.5849% at the 99% confidence level. What is the standard deviation of the rate changes, in basis points, if..
Advise the Sampsons on whether they should continue making minimum payments on their credit card or use money from their savings to pay off the credit balance.
a movie studio sells the latest movie on dvd to blockbuster at 10 per dvd. the marginal production cost for the movie
The Island Hotel Company, Inc. just paid a dividend of $1.50 per share, and that dividend is expected to grow at a constant rate of 5.00% per year in the future. The company's beta is 1.95, the market risk premium is 6.25%, and the risk-free rate is ..
An investment offers $7,000 per year for 20 years, with the first payment occurring 1 year from now. Assume the required return is 10 percent. What would the value be today? A financial security pays $2 next year, $4 the year after that, then $2, the..
A company is considering various advertising media to promote its new toy. Pertinent information regarding potential customers reached and costs per advertisement is given below: No. of Customers Maximum Times Cost per. Media Reached Available per Mo..
The price of a new car is $40,000. Assume that an individual makes a down payment of 25% toward the purchase of the car and secures financing for the balance at the rate of 9%/year compounded monthly. What monthly payment will she be required to make..
Rabie, Inc., has an issue of preferred stock outstanding that pays a $5.30 dividend every year, in perpetuity. Required: If this issue currently sells for $80.25 per share, what is the required return?
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