Standard deviation and expected return with probability
Consider the following information about Stock I and II:
State of Probability of Rate of Return if State Occurs
Economy State of Economy Stock I Stock II
Recession 014 -015 -015
Normal 012 029 043
Irrational ex- 074 029 027
uberance
The market risk premium is 8%, and risk-free rate is 28%
a What is the standard deviation percent on stock I’s
expected return and the stock beta?
b what is the standard deviation percent on stock II’s
expected return and the stock beta?
c Which stock I or stock II is “riskier”?
For standard deviation and beta: round answer to 2 decimal
places (eg:3216
Suppose two projects have the same expected business value Project A has a very high estimated business value along with a high probability of failure Project B has a much lower estimated business value along with a low probability of failure If you could do only one of the projects, which one would you choose and under what conditions?
Suppose sales for the past 6 months have been 109, 118, 97, 120, 92, and 116 Using a smoothing coefficient of 04, what is the exponentially smoothed value for the 4th period