The stock of Business Adventures sells for $65 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows:
Dividend Stock Price
Boom $2.40 $73
Normal economy 1.60 66
Recession .85 57
a. Calculate the expected holding-period return and standard deviation of the holding-period return. All three scenarios are equally likely. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Expected return %
Standard deviation %
b. Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury bills. The return on bills is 3%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Expected return %
Standard deviation %