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Homework answers / question archive / The stock of Business Adventures sells for $35 a share

The stock of Business Adventures sells for $35 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 $45 Boom $1.20 Normal economy 1.20 38 Recession 0.60 26

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 4% (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Expected return Standard deviation

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