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    Calculating the standard deviation,expected return,PV & PMT

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    The return distribution for the asset XYZ is as shown below:
    Return Probability
    - 0.1 0.10
    + 0.1 0.40
    +0.20 0.30
    +0.30 0.20

    What is the standard deviation for the XYZ returns?
    A. 0.0125
    B. 0.1118
    C. 0.0625
    D. 0.0791

    The beta of Microsoft's stock is 1.2, whereas the risk-free rate of return is 4 percent. Assume that the expected return on the market is 16 percent. Then, what is the expected return on Microsoft stock?
    A. 8.80%
    B. 28.00%
    C. 18.40%
    D. 23.20%

    If you have a 3 year loan that requires $1,000 payments each year at 7% annual interest rate what would be the present value of the loan?
    A. $2,624.32
    B. $3,000.00
    C. $3,210.00
    D. $2,803.74

    Robert has a mortgage on his home of $400,000 and has a fixed rate mortgage of 6.125% for 30 years. What would his monthly payments be for this loan?
    A. $2,041.67
    B. $2,596.55
    C. $2,430.45
    D. $2,788.46

    What is the effective annual interest rate?
    A. The simplest interest rate charged.
    B. Rate that reflects compounding.
    C. Rate with bank fees included.
    D. Interest rate quoted by banks.

    © BrainMass Inc. brainmass.com October 4, 2022, 1:24 pm ad1c9bdddf
    https://brainmass.com/business/finance/calculating-standard-deviation-expected-return-pv-pmt-469101

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    SOLUTION This solution is FREE courtesy of BrainMass!

    Please refer attached file for better clarity of solutions.

    The return distribution for the asset XYZ is as shown below:

    Return Probability
    - 0.1 0.10
    + 0.1 0.40
    +0.20 0.30
    +0.30 0.20

    What is the standard deviation for the XYZ returns?
    A. 0.0125
    B. 0.1118
    C. 0.0625
    D. 0.0791

    Correct answer is B. Please refer attached Excel file.
    B. 0.1118

    The beta of Microsoft's stock is 1.2, whereas the risk-free rate of return is 4 percent. Assume that the expected return on the market is 16 percent. Then, what is the expected return on Microsoft stock?
    Risk Free rate=rf=4%
    Beta=b=1.2
    Market return=rm=16%
    R=rf+b*(rm-rf)=4%+1.2*(16%-4%)=0.184

    Correct answer is C.
    C. 18.40%

    I have a 3 year loan that requires $1,000 payments each year at 7% annual interest rate what would be the present value of the loan?

    Interest rate=RATE=7%
    Periodic Payment=PMT=-1000
    Number of periods=NPER= 3
    Type of payment=TYPE=0
    FV of loan=0

    PV of loan=$2,624.32 =PV(C27,C29,C28,C31,C30)

    Correct answer is A. 2624.32, Please refer attached Excel file.

    Robert has a mortgage on his home of $400,000 and has a fixed rate mortgage of 6.125% for 30 years. What would his monthly payments be for this loan?
    A. $2,041.67
    B. $2,596.55
    C. $2,430.45
    D. $2,788.46

    Interest rate=RATE=6.125%/12= 1%
    Periodic Payment=PMT=?
    Number of periods=NPER=30*12=360
    Type of payment=TYPE=0
    FV of loan=0
    PV = -400000

    PMT=$2,430.44 =PMT(D37,D39,D42,D41,D40)

    Correct option is C. $2,430.45

    What is the effective annual interest rate?
    A. The simplest interest rate charged.
    B. Rate that reflects compounding.
    C. Rate with bank fees included.
    D. Interest rate quoted by banks.

    Choice is correct.
    B. Rate that reflects compounding.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com October 4, 2022, 1:24 pm ad1c9bdddf>
    https://brainmass.com/business/finance/calculating-standard-deviation-expected-return-pv-pmt-469101

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