The stock of Business Adventures sells for $60 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:
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Dividend
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Stock Price
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|
Boom
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$2.00
|
$70
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Normal economy
|
1.60
|
62
|
|
Recession
|
.80
|
52
|
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.)
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Expected return
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%
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|
Standard deviation
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%
|
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 4%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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Expected return
|
%
|
|
Standard deviation
|
%
|