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What is the expected holding-period return for stock

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Reference no: EM132796607

You have been given the price at t =0 (P0) and probability distribution for the price at t =1 (P1) for three stocks:

P1 P0 Boom (30%) Normal (50%) Recession (20%)

Stock A 55 70 60 50

Stock B 30 50 35 20

Stock C 45 55 50 40

a. What is the expected holding-period return for each stock?

b. What is the expected standard deviation for each stock?

c. Suppose the risk-free rate of return is 2%. What is the Sharpe ratio for each stock?

d. Which stock will you choose to hold?

Reference no: EM132796607

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