A will that is completely handwritten dated and signed by the person making the will

The following annual returns for Stock E are projected over the next year for three possible states of the economy. What is the

mr_godi [17]

The question is incomplete. Here is the complete question:

The following annual returns for Stock E are projected over the next year for three possible states of the economy. What is the stock’s expected return and standard deviation of returns? E(R) = 8.5% ; σ = 22.70%; mean = $7.50; standard deviation = $2.50

State Prob E(R)

Boom 10% 40%

Normal 60% 20%

Recession 30% - 25%

Answer:

The expected return of the stock E(R) is 8.5%.

The standard deviation of the returns is 22.7%

Explanation:

<u>Expected return</u>

The expected return of the stock can be calculated by multiplying the stock's expected return E(R) in each state of economy by the probability of that state.

The expected return E(R) = (0.4 * 0.1) + (0.2 * 0.6) + (-0.25 * 0.3)

The expected return E(R) = 0.04 + 0.12 -0.075 = 0.085 or 8.5%

<u>Standard Deviation of returns</u>

The standard deviation is a measure of total risk. It measures the volatility of the stock's expected return. The standard deviation (SD) of a stock's return can be calculated by using the following formula:

SD = √(rA - E(R))² * (pA) + (rB - E(R))² * (pB) + ... + (rN - E(R))² * (pN)

Where,

rA, rB to rN is the return under event A, B to N.
pA, pB to pN is the probability of these events to occur
E(R) is the expected return of the stock

Here, the events are the state of economy.

So, SD = √(0.4 - 0.085)² * (0.1) + (0.2 - 0.085)² * (0.6) + (-0.25 - 0.085)² * (0.3)

SD = 0.22699 or 22.699% rounded off to 22.70%

7 0

2 years ago

In Macroland, autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, plan

alina1380 [7]

Answer:

B) 1,160.

Explanation:

First we must calculate planned aggregate expenditures (PAE) and then determine where Y = PAE:

PAE = consumption + planned investment + government spending + net exports = 100 + 0.75(Y - 40) + 50 + 150 +20 = 100 + 0.75Y - 30 + 50 + 150 + 20 = 290 + 0.75Y

Now we must determine where Y and PAE intercept:

Y = 290 + 0.75Y

Y - 0.75Y = 290

0.25Y = 290

Y = 290 / 0.25 = 1,160

*Planned aggregate expenditure = total planned spending, it differs from GDP because GDP includes unplanned investment.

PAE = C + Ip + G + NX while GDP = C + I + G + NX

5 0

2 years ago

What is the difference between training and development?...

gtnhenbr [62]

Training is working hard and development is getting better