SHOW WORK QUESTION 1 The following returns are predicted for ABC stock under three projected economic scenarios.

Pi = Probability of economic scenario i. Ri = Return of ABC stock in economic scenario i. PiRi

Boom0.2512%

Normal0.56%

Recession0.25-2% What is the standard deviations of returns? If the returns are normally distributed, what is the expected range of returns assuming a 95% level of confidence? If the price of stock is currently $50, what is the expected range of prices using a 95% level of confidence? QUESTION 2 The following information is given:

View complete question SHOW WORK QUESTION 1 The following returns are predicted for ABC stock under three projected economic scenarios.

Pi = Probability of economic scenario i. Ri = Return of ABC stock in economic scenario i. PiRi

Boom0.2512%

Normal0.56%

Recession0.25-2% What is the standard deviations of returns? If the returns are normally distributed, what is the expected range of returns assuming a 95% level of confidence? If the price of stock is currently $50, what is the expected range of prices using a 95% level of confidence? QUESTION 2 The following information is given: ProbabilityReturn – StockKReturn – Stock L

Recession XXXXXXXXXX

Boom XXXXXXXXXX What is the expected return and standard deviation of the portfolio if we hold 60% of Stock K and 40% of stock L? QUESTION 3 The risk-free rate is 8% and the expected return on the market is 16%. As an analyst, you are preparing a recommendation report on the following two stocks:

StockSStock B

Beta XXXXXXXXXX

Expected dividend nextyear$1.10$4.00

Growth rate(g)8%6%

Current Price(p0) $22$30.77 a. Would you recommend to buy or sell the stocks? Explain. b. At what prices will you change your decision from either buy or sell to hold? QUESTION 1 The following returns are predicted for ABC stock under three projected economic scenarios.

Pi = Probability of economic scenario i. Ri = Return of ABC stock in economic scenario i. PiRi

Boom0.2512%

Normal0.56%

Recession0.25-2% What is the standard deviations of returns? If the returns are normally distributed, what is the expected range of returns assuming a 95% level of confidence? If the price of stock is currently $50, what is the expected range of prices using a 95% level of confidence? QUESTION 2 The following information is given: ProbabilityReturn – StockKReturn – Stock L

Recession0.70-0.200.30

Boom0.300.700.10 What is the expected return and standard deviation of the portfolio if we hold 60% of Stock K and 40% of stock L? QUESTION 3 The risk-free rate is 8% and the expected return on the market is 16%. As an analyst, you are preparing a recommendation report on the following two stocks:

StockSStock B

Beta0.851.35

Expected dividend nextyear$1.10$4.00

Growth rate(g)8%6%

Current Price(p0) $22$30.77 Would you recommend to buy or sell the stocks? Explain. At what prices will you change your decision from either buy or sell to hold?

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