Which stock is likely to give her a better return

Assignment Help Financial Management

Reference no: EM131867875

Expedia Inc. is traded on NASDAQ and Red Lion Hotels is traded on NYSE. Sarah Forsyth owns shares in both companies. She wants to estimate what her expected return and risk for each stock will be for next year.

Expedia Red Lion Hotels

Possible Return Probability Possible Return Probability

20% 20% -15% 20%

30% 50% 20% 50%

40% 30% 60% 30%

a) Which stock is likely to give her a better return? Which stock is riskier? (show your calculations).

b) If she invests $15,000 in Red Lion Hotels and $5,000 in Expedia what will be the expected return for her portfolio and the portfolio risk? (show your calculations).

Reference no: EM131867875

Questions Cloud

What will be the value of each of these bonds : What will be the value of each of these bonds when the going rate of interest is (1) 5%, (2) 8%, and (3) 12%?

What is interest rate risk-which bond has interest rate risk : What is interest rate risk? Which bond has more interest rate risk? Why?

What should the expected return be : Southwest Airlines has a beta of 1.13, the S&P 500 return is 11% and the risk-free rate of return is 5.2%. What should the expected return be?

What is internal rate of return : Franchising, Inc. is considering a major investment. The investment will have an initial cost of $728,000. What is the internal rate of return?

Which stock is likely to give her a better return : Which stock is likely to give her a better return? Which stock is riskier?

Determine the time of validity of note with nominal value : To determine the time of validity of a note with nominal value of $ 1,000, discounted value of $ 978 and discount rate per year of 12 %.

Determines discount rate equivalent to rate of return : Determines the discount rate equivalent to a rate of return of 25.5%

Provides the lowest effective annual rate of return : Which one of the following investments provides the lowest effective annual rate of return

Determine the nominal value of paid : Determine the nominal value of a paid whose discounted value today is $434,522, expires in 18 months and the discount rate is 10.23%.

User Account

All Pages