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Author Question: When looking at the history of returns, we are taking an ex-ante review and when we are looking at ... (Read 31 times)

brutforce

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on: Jul 10, 2018
When looking at the history of returns, we are taking an ex-ante review and when we are looking at the future of returns we are taking an ex-post view.
 
  Indicate whether the statement is true or false.

Question 2

George is considering an investment in Parson Inc. and has gathered the information in the following table. What is the expected standard deviation for a share of the firm's stock?
 
  State of the Economy Probability of the
  State Conditional Expected Return
  Parson Inc.
  Recession .25 -20
  Steady .60 10
  Boom .15 35
 
  A) 17.46
  B) 22.48
  C) 27.54
  D) 31.62


coreycathey

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: FALSE
Explanation: When looking at the history of returns we are taking an ex-post review and when we are looking at the future of returns we are taking an ex-ante view.

Answer to Question 2

Answer: A
Explanation: A) Standard deviation = (rs - E(r))2  probs1/2
= (-20 - 6.25)2  .25 + (10 - 6.25)2  .60 + (35 - 6.25)2  .151/2 = 17.46.


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brutforce

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Reply #2 on: Jul 10, 2018
TY


coreycathey

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Reply #3 on: Jul 10, 2018
Happy to Help


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