Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![Expected return. Hull Consultants, a famous think tank in the Midwest, has provided probability estimates for the four potential economic states for the coming year. The probability
of a boom economy is 12%, the probability of a stable growth economy is 16%, the probability of a stagnant economy is 52%, and the probability of a recession is 20%. Estimate the
expected returns on the following individual investments for the coming year,
Hint: Make sure to round all intermediate calculations
answers you will type.
What is the expected return of the stock investment?
% (Round to two decimal places.)
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Investment
Stock
Corporate bond
Government bond
Boom
27%
10%
9%
Forecasted Returns for Each Economy
Stable
Growth
13%
7%
6%
Stagnant
6%
6%
5%
Recession
- 15%
3%
2%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F70d6cda2-b7e6-424b-9dee-47917aafba78%2Ff07fba0d-f71d-4714-a948-a924f79f7573%2Fdj0iyal_processed.png&w=3840&q=75)
Transcribed Image Text:Expected return. Hull Consultants, a famous think tank in the Midwest, has provided probability estimates for the four potential economic states for the coming year. The probability
of a boom economy is 12%, the probability of a stable growth economy is 16%, the probability of a stagnant economy is 52%, and the probability of a recession is 20%. Estimate the
expected returns on the following individual investments for the coming year,
Hint: Make sure to round all intermediate calculations
answers you will type.
What is the expected return of the stock investment?
% (Round to two decimal places.)
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Investment
Stock
Corporate bond
Government bond
Boom
27%
10%
9%
Forecasted Returns for Each Economy
Stable
Growth
13%
7%
6%
Stagnant
6%
6%
5%
Recession
- 15%
3%
2%
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