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1) The stock of Business Adventures sells for $35...

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1) The stock of Business Adventures sells for $35 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows: Dividend Stock price Boom $1.20 $45 Normal economy 1.20 38 Recession .60 26 a. Calculate the expected holding-period return and standard deviation of the holding-period return. All three scenarios are equally likely. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Expected return % Standard deviation % b. Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury bills. The return on bills is 4%. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Expected return % Standard deviation % 2) Using the Table 5.4 as your guide, what is your estimate of the expected annual HPR on the S&P 500 stock portfolio if the current risk-free interest rate is 5.3%? (Round your answer to 2 decimal places.) Expected annual HPR %

 

Paper#8655 | Written in 18-Jul-2015

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