Assume that an economy can have four states: Severe recession, Mild recession, Normal growth, Boom. Probability of each scenario, stock and bond annual returns in that scenario are provided below. Let's also assume that you are creating a portfolio with 65% stocks and 35% bonds. Economy State Severe recession Probability 0.20 Stock Return (%) Bond Return (%) -37 -9 Mild recession 0.30 -11 15 Normal growth 0.40 14 8 Boom 0.10 30 -5 How much is the annual standard deviation of Stock returns? Enter your answer in the following format: 0.1234 Hint: Answer is between 0.1938 and 0.2373

Assume that the economy can experience high growth, normal growth, or recession. Under these conditions, you expect the following stock market returns for the coming year: Probability State of the Economy High Growth Return 0.2 +30% Normal Growth 0.7 +12% Recession 0.1 -15% a. Compute the expected value of a $1,000 investment over the coming year. If you invest $1,000 today, how much money do you expect to have next year? What is the percentage expected rate of return? Instructions: Enter dollar values rounded to the nearest whole dollar and percentages rounded to one decimal place. The expected value is $ 1129 and the expected rate of return is 12.9 %. b. Compute the standard deviation of the percentage return over the coming year. Standard deviation 11.7 % c. If the risk-free return is 7 percent, what is the risk premium for a stock market investment? Risk premium 17.5 %

How would you describe the relationship between a risky investment and the return on that investment (think stocks or retirement accounts)? a casual or limited relationship there is no relationship between the level of risk and the return you get on your investment a direct or positively correlated relationship an inverse or negatively correlated relationship

Extensions Help | Arial 1 Last edit was seconds ago 11 1 + BIUA ¹2' 3 C 田 5 6 1. What are 2 examples of variables that can have a correlation to the demand/forecast of a product your company makes? 2. What does it mean when we say we use the BOM to do an MRP MacBook Pro U = = == explosion? 3. Explain what do we call "Strategic Stock". Give an example of when this could be triggered I 7 12

Which of the following investment strategies involves generating a higher expected rate of return through increasing risk? Answer a. Leverage b. Value at risk            c. Diversifying d. Hedging risk

Define the term Expected return on a risky asset?

Suppose Caroline is choosing how to allocate her portfolio between two asset classes: risk-free government bonds and a risky group of diversified stocks. The following table shows the risk and return associated with different combinations of stocks and bonds.CombinationFraction of Portfolio in Diversified StocksAverage Annual ReturnStandard Deviation of Portfolio Return (Risk)(Percent)(Percent)(Percent)A 0 1.50 0B 25 3.00 5C 50 4.50 10D 75 6.00 15E 100 7.50 20There is a relationship between the risk of Caroline's portfolio and its average annual return.Suppose Caroline currently allocates 75% of her portfolio to a diversified group of stocks and 25% of her portfolio to risk-free bonds; that is, she chooses combination D. She wants to reduce the level of risk associated with her portfolio from a standard deviation of 15 to a standard deviation of 5. In order to do so, she must do which of the following? Check all that apply. Sell some of her stocks and use the proceeds to purchase…

Why may different analysts arrive at different intrinsicvalues for the same stock?

Refer to the figure below: +16 +12 +8 Consumption Investment is more volatile than consumption. -12 Investment 16 -20 -24 1 2 3 41 2000 2 3 4 1 2 3 4 1 2 3 41 2 3 41 2003 2 3 4 1 2 3 41 2 3 4 1 2 3 4 2007 2001 2002 2004 2005 2006 2008 CALENDAR QUARTER Instructions: Enter your responses as a percent rounded to the nearest whole number. What was the range, in absolute value of percentage change, of the variation in quarterly growth rates between 2001 Q1 and 2003 Q4 of a. Consumer spending? % b. Investment spending? % CHANGE FROM PRIOR QUARTER (porcent)

3.) An investor is thinking of purchasing blue-chip stocks as part of his portfolio. At present, he is considering three blue chip stocks: Alpha, Bravo and Charlie. Based on the forecast of economists, there are three possible states of nature in the economy: growth, stagnation, recession, depression. Economists predicted that their respective probabilities are 0.25, 0.35, 0.30 and 0.10. Historical returns for the three blue chip stocks are summarized below: Stock Growth Stagnation Recession Depression Alpha 11% 3% -2% -20% Bravo 20% -1% -5% -3% Charlie 7% 2% 0% -5% (a) Determine the expected return for each stock. (b) Which stock is the riskiest using the standard deviation as a criterion? (c) Which stock is the least risky using the coefficient variation?