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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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Expert Solution
PFA
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