The stock of Business Adventures sells for $40 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 |
$2.00 |
$54 |
Normal economy |
1.20 |
48 |
Recession |
.95 |
39 |
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 |