This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: The company that prints unemployment insurance checks is named Countercyclical Printing, Inc ... (Read 97 times)

kshipps

  • Hero Member
  • *****
  • Posts: 571
on: Jul 10, 2018
The company that prints unemployment insurance checks is named Countercyclical Printing, Inc Countercyclical Printing's beta is -0.75, the risk free rate is 8, and the risk premium on the market is 7.
 
  What is the equilibrium expected rate of return on Countercyclical Printing's stock?
  A) -8.75
  B) -3.25
  C) 2.75
  D) 4.50
  E) 5.25

Question 2

You are considering buying a share of stock in a firm that has the following two possible payoffs with the corresponding probability of occurring.
 
  The stock has a purchase price of 50.00. You forecast that there is a 40 chance that the stock will sell for 70.00 at the end of one year. The alternative expectation is that there is a 60 chance that the stock will sell for 30.00 at the end of one year. What is the expected percentage return on this stock, and what is the return variance?
  A) -8.00, 15.36
  B) 4.00, 30.72
  C) 8.00, 15.36
  D) -4.00, -30.72


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

AmberC1996

  • Sr. Member
  • ****
  • Posts: 317
Reply #1 on: Jul 10, 2018
Answer to Question 1

C

Answer to Question 2

Answer: A
Explanation: A) Expected payoff =  Expected payoffi  probabilityi = .40  70.00 + .60  30 = 46.00.
E(r) = = = -8.00
Variance = (0.40)(0.40 - (-.08))2 + (0.60)(-0.40 - (-0.08))2 = 0.1536, or 15.36.


kshipps

  • Member
  • Posts: 571
Reply 2 on: Jul 10, 2018
Great answer, keep it coming :)

dantucker

  • Member
  • Posts: 346
Reply 3 on: Yesterday
Wow, this really help

« previous next »
 

Did you know?

Asthma attacks and symptoms usually get started by specific triggers (such as viruses, allergies, gases, and air particles). You should talk to your doctor about these triggers and find ways to avoid or get rid of them.

Did you know?

Cyanide works by making the human body unable to use oxygen.

Did you know?

In inpatient settings, adverse drug events account for an estimated one in three of all hospital adverse events. They affect approximately 2 million hospital stays every year, and prolong hospital stays by between one and five days.

Did you know?

Long-term mental and physical effects from substance abuse include: paranoia, psychosis, immune deficiencies, and organ damage.

Did you know?

Approximately 15–25% of recognized pregnancies end in miscarriage. However, many miscarriages often occur before a woman even knows she is pregnant.

When the United States gets stuck over a controversial issue—usually something a divided Congress ca When the United States gets stuck over a controversial issue—usually something a divided Congress ca
The Stillwater Mining Company The Stillwater Mining Company
Correctly written checks. Correctly written checks.
How Skeletal Muscles are Named How Skeletal Muscles are Named
A company that sells sweatshirts finds that the profit can be modelled by P(s)= ... A company that sells sweatshirts finds that the profit can be modelled by P(s)= ...
During a period of high power demand, the voltage output of the power company is reduced by ... During a period of high power demand, the voltage output of the power company is reduced by ...
Video: Acid-base imbalances - compensation of respiratory acidosis and alkalosis

For a complete list of videos, visit our video library