State of Economy | Probability of State of Economy | Rate of Return if State Occurs Recession | .26 | -9.40% Normal | .43 | 10.90% Boom | .31 | 21.40% Multiple Choice 11.32% 8.26% 7.63% 13.77%
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Recession: $0.26 \times (-9.40\%) = -2.444\%$ Normal: $0.43 \times 10.90\% = 4.687\%$ Boom: $0.31 \times 21.40\% = 6.634\%$ Show more…
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12) You recently purchased a stock that is expected to earn 21 percent in a booming economy, 16 percent in a normal economy, and lose 5 percent in a recessionary economy. There is a 20 percent probability of a boom, a 65 percent chance of a normal economy, and a 15 percent chance of a recession. What is your expected rate of return on this stock? 3.13 percent 6.92 percent 10.67 percent 12.33 percent 13.85 percent
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Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A Stock B Recession 0.10 0.05 -0.19 Normal 0.60 0.08 0.12 Boom 0.30 0.16 0.36 Required: (a) Calculate the expected return for Stock A. (Do not round your intermediate calculations.) 10.10%, 9.19%, 11.86%, 11.37%, 9.25% (b) Calculate the expected return for Stock B. (Do not round your intermediate calculations.) 16.10%, 9.67%, 17.91%, 15.30%, 16.74% (c) Calculate the standard deviation for Stock A. (Do not round your intermediate calculations.) 3.96%, 2.80%, 4.16%, 3.76%, 4.12% (d) Calculate the standard deviation for Stock B. (Do not round your intermediate calculations.) 15.88%, 11.23%, 17.67%, 15.08%, 16.51%
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