am. 134. Problem 11-5 Calculating Returns and Standard DeviationsYou have been given the following information:State ofEconomyRecessionNormalBoomProbability ofState ofRate of Return if State OccursEconomyStock AStock B.17.08-12.58.11.17.2516.34a. Calculate the expected return for the two stocks. (Do not round intermediatecalculations and enter your answers as a percent rounded to 2 decimal places, e.g.,32.16.)b. Calculate the standard deviation for the two stocks. (Do not round intermediatecalculations and enter your answers as a percent rounded to 2 decimal places, e.g.,32.16.)Answer is not complete.a. Stock A expected returna. Stock B expected returnb. Stock A standard deviationb. Stock B standard deviation11.74%16.32%%%

Step 1: Identify the formula for expected value of a probability distributionexpected value of a…

Answered: Problem 11-5 Calculating Returns and…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Based on the following information: State of Economy Probability of State of Economy Return on Stock J Return on Stock K Bear .20 -.030.024 Normal .55.128.052 Bull .25 .208.082 a. Calculate the expected return for each of the stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation for each of the stocks. ( Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g , 32.16.) c. What is the covariance between the returns of the two stocks? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.) d. What is the correlation between the returns of the two stocks? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616.)
You are given the following information: State ofEconomy Return onStock A Return onStock B Bear .112 −.055 Normal .105 .158 Bull .083 .243 Assume each state of the economy is equally likely to happen. a. Calculate the expected return of each stock. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation of each stock. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c. 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., .161616.) d. 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…
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