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Category > Business & Finance Posted 10 Jun 2017 My Price 7.00

Part 1: A stock is expected to earn 17 percent in a boom e

Part 1:

A stock is expected to earn 17 percent in a boom economy and 8 percent in a normal economy. There is a 36 percent chance the economy will boom and a 64.0 percent chance the economy will be normal. What is the standard deviation of these returns?

5.35 Percent

5.47 Percent

6.13 Percent

4.32 Percent

Part 2:

A stock is expected to earn 19 percent in a boom economy, 11.50 percent in a normal economy, and lose 35 percent in a recessionary economy. There is a 25 percent chance the economy will boom and a 60 percent chance the economy will be normal. What is the expected risk premium for this stock if the risk-free rate is expected to be 3.70 percent?

1.30 percent

2.70 percent

1.74 percent

2.41 percent

Part 3:

Which type of risk can be eliminated through diversification?

total risk

asset-specific risk

market risk

systematic risk

Answers

Homework Helper
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Status NEW Posted 10 Jun 2017 08:06 AM My Price 7.00

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