Log in
Economics
2
answers
0
watching
22
views
26 Nov 2019

The two stocks listed below have the following return distributions. What is the expected return on Company X's stock?

Company X Company Y Prob

State 1 3 8 0.30

State 2 2 11 0.35

State 3 12 1 0.25

State 4 9 2 0.10

6.70

5.50

10.00

6.50

Watch
2
answers
0
watching
22
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Unlock all answers

Get 1 free homework help answer.
Get unlimited access
Already have an account? Log in
Share
Trinidad Tremblay
Trinidad TremblayLv2
4 Jan 2019
Get unlimited access
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

1.) Two projects A and B have the potential uniform annual benefits and their associated probabilities of occurrence as shown below.

EUAB Probability EUAB Probability
$1000 0.1 $1500 0.2
$2000 0.3 $2500 0.4
$3000 0.4 $3500 0.3
$4000 0.2 $4500 0.1

The expected value of these project are:

a. $1,650 and $1,987
b. $2,700 and $2,800
c. $3,650 and $3,245
d. $2,210 and $2,151

2.) An investment opportunity has the potential of generating yearly revenues with the associated probabilities for the next five years as shown below. The salvage value at the end of five years is 0. The potential revenue in any given year is independent of any other year. What are the mean and standard deviation of the present worth, using an interest rate of 12%?

Potential Revenue, $ Probability
20,000 0.30
30,000 0.40
50,000 0.20
60,000 0.10

Select one:
a. $222,480 and $81,503
b. $235,652 and $65,238
c. $111,070 and $38,802
d. $122,570 and $48,901

3.) What is the expected net present worth of the following project assuming a life of 10 years? The project has absolutely no salvage value at the end of the useful life. The company uses an interest rate of 12% to evaluate this project.

Initial Cost,$ Probability Annual Revenue, $ Probability
30,000 0.15 7,000 0.10
40,000 0.20 9,000 0.25
60,000 0.30 10,000 0.30
80,000 0.25 12,000 0.30
100,000 0.10 15,000 0.05

Select one:
a. $3,705
b. -$2,305
c. -$22,305
d. $4,506

4.) An investment of $18,000 is expected to generate annual revenue of $8.000 throughout the life of the investment. The risk is based on the life of the investment. The estimate of the probability for the duration of the investment is given in the table below.

Life, Years 3 4 5 6
Probability 0.1 0.4 0.3 0.2

No matter what the life of the investment might be, there will be no salvage value. Using a value of 15% MARR, what is the risk (standard deviation) associated with this investment?
a. $3.598
b. $4,536
c. $2,528


5.) A city engineer has compiled the following data on a flood damage project. to control the flood, the construction of a small dam will cost $100,000. Based on the estimated damage data collected, what is the expected damage?

Damage Estimate, $ Probability
200,000 0.30
100,000 0.50
50,000 0.10
0 0.10

Select one:
a. $225,550
b. $365,800
c. $215,005
d. $115,000

1) A $1,000 par value bond, paying $50 semiannually, with an 8 percent yield to maturity and five years remaining to maturity should sell for ________.

2) Your investment has a 40% chance of earning a 12% rate of return, a 50% chance of earning an 8% rate of return, and a 10% chance of losing 3%. What is the standard deviation of this investment?

3) You purchased a share of stock for $59. One year later you received $5.25 as a dividend and sold the share for $58. Your holding-period return was _________.

4) An insurance company purchases corporate bonds in the secondary market with six years to maturity. The total par value is $55 million. The coupon rate is 11 percent, with annual interest payments. If the expected required rate of return in 4 years is 9 percent, what will the market value of the bonds be then?

Short Answer/Problems—Answer all numbered questions @ 10 points each. Provide your answers in the space provided or the back of the page. Make sure to scan all work pages. Any quantitative questions require showing your work for full credit. Round all $ problems to the nearest cent. All other calculations must be to at least the fifth decimal place. 1. Answer BOTH parts a & b below. a) Explain the impacts of low level unanticipated inflation for a country like the United States. b) In the United States, our confidence in our fiat money is derived from (3 things) 2. Given the following 4 scenarios: • The contract interest rate was 6.5% and the expected inflation rate was 2.5%. • The contract interest rate was 12% and the expected inflation rate was 10%. • The contract interest rate was 7.5% and the expected inflation rate was 4%. • The contract interest rate was 4% and the expected inflation rate was 1%. a) Indicate which scenario would have been best for the lender and explain why it is best for the lender. b) With an ex post actual inflation rate of 2.25%, indicate which scenario would have been best for society and explain why it is best for society of the four options. 3. Define, compare, and contrast two of the following sets of terms as they. a. organized exchange markets vs. OTC (over the counter) markets b. fiat money vs. representative full-bodied money c. adverse selection vs. moral hazard 4. Indicate what would happen to both M1 and M2 (increase, decrease, no change) due to each of the following events. Consider each lettered event to be independent of the others. a) you write a check for cash at the casino b) an individual redeems a personal CD and deposits the funds into a savings deposit account c) U.S. commercial banks use some of their excess reserves to purchase $250 billion worth of U.S. Treasury securities from the Federal Reserve. d) as the economy improves, banks ease their credit standards and approve a higher percentage of loan applications. e) you spend $4,000 in U.S. currency while on your spring break trip to Acapulco (if you spent less than that you could not have had much fun) Part III: Longer Problems—Answer all numbered questions @ 15 points each. Provide your answers in the space provided or the back of the page. Make sure to scan all work pages. Any quantitative questions require showing your work for full credit. Round all $ problems to the nearest cent. All other calculations must be to at least the fifth decimal place. 5. The following is a historical list of median home prices in two states. Year State 1 ($) State 2 ($) GDP deflator (2009 base year) 1950 9,564 5,396 14.09 1960 15,100 9,800 17.56 1970 23,100 13,000 23.18 1980 84,500 43,900 46.05 1990 195,500 50,800 67.62 2000 211,500 74,400 82.59 2017 (estimate) 400,000 201,991 113.61 a. Convert each price into current year dollars. b. Determine how much a person would have had to pay in 1950 (for both states) to equal the 2017 real home value. c. For both states, determine the percentage increase in home values from 1950-2017 (one calculation for each). 6. Using the following information for a U.S. state: Nominal GDP Real GDP Population Year (millions) (millions 2009 $’s) 1,151,119 1,421,713 32,987,911 1998 1,879,520 1,975,457 36,020,878 2006 2,350,807 2,143,167 38,792,459 2014 a. What is the average annual growth rate for this state during the time periods listed? (Note: time periods of interest are 1998-2006 & 2006-2014) b. What is the average annual inflation rate for this state during the time periods listed? c. To what extent are living standards likely changing in this economy? Explain and support your claim using evidence from the above table. d. For 1 bonus point, indicate the U.S. state associated

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in