Problem
The stock of company A sells for $177 a share. Its likely dividend payout and end-of-year price will be:
|
|
Probability
|
Dividend/$
|
Stock price/$
|
Return
|
|
Economic growth
|
0.1
|
2
|
210
|
|
|
Normal
|
0.6
|
2
|
190
|
|
|
Economic recession
|
0.3
|
0
|
150
|
|
A. Calculate the holding-period return and fill them into the chart.
B. Calculate the expected return.
C. Calculate the standard deviation for the expected return.
D. Suppose that an investor decide to hold a portfolio invested 65% in this company and the rest in 10-year Treasury notes. The return on the notes is expected to be 3.5%. Find the expected return for this portfolio.