A particular stock had a return last year of 4 percent. However, you look at the stock price and notice that it actually didnĂ˘??t change at all last year. How is this possible?

2.Returns Distributions
What is the probability that the return on small stocks will be less than 100 percent in a single year ( think about it)? What are the implications for the distribution of returns?

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1. There are two cases that this is possible. Let us look at them one by one.

case a) The stock price remained constant for the entire year, but stock paid an annual dividend of 4%. In this case, you would have an interest/dividend return of 4%.

case b) This is a bit of a tricky case, so we illustrate it with an example. Suppose Jan. 1st 2010 the stock was trading at $1, and Jan 1st 2011 the stock is also at $1. The price did not change in the year, but the price flunctuated. So let us say we recorded the following data.

Date Price Change from last period
Jan 1st. 2010 $1
Apr 1st. 2010 $2 +100%
Jun 1st. 2010 $1 -50%
Sep 1st. 2010 $2 +100%
Jan 1st. 2011 $1 -50%

The market and Stock J have the following probability distributions:
Probability rm rj
0.3 15% 20%
0.4 9 5
0.3 18 12
A. Calculate the expected rates of return for the market and Stock J.
B. Calculate the standard deviations for the market and Stock J.
C. Calculate the coefficient of variat

See the attachment.
1. Two stocks, i and j have the following probability distributions (see attached file). Calculate the expected returns, standard deviations and coefficient of variations for stocks i and j. Which stock would be preferred by the average investor? Explain why in your own words.
2. Calculate the return d

Returns and the Bell Curve
An investment has an expected return of 8 percent per year with a standard deviation of 4 percent. Assuming that the returns on this investment are at least roughly normally distributed, how frequently do you expect to lose money?
Using Returns Distributions
Based on the historical record, if

Calculate the expected returnand standard deviation of returns for asset A are (See below.)
Possible Outcomes Probability Returns (%)
Pessimistic 0.25 5
Most likely 0.55 10
Optimistic 0.20 13

Complete the following schedule for each case. Assume the shareholders have ample basis in the stock investment.
Accumulated Current Cash Distributions Dividend Return of
E&P Beginning E&P All on last day Income Capital
Of Year of Year
a) $1

The following table shows the nominal returns on U. S. stocks and the rate of inflation.
a. What was the standard deviation of the market returns?
b. Calculate the average real return.
Year Nominal Return (%) Inflation (%)
2004 12.5 3.3
2005 6.4

Please see the attached file.
Problem 1
The risk andreturn profiles of Assets P and Q are given below along with the assigned probability of distributions.
Economy Probability Possible Returns on P Possible Returns on O
Boom .20 .19 .15
Normal .60 .15 .11
Recession .20 -.04 .05
a. Compute the expected returnand

Emery, Finnerty & Stowe - Ch. 6, problems A6, B6, & B10 (a only)-
A6. (Expected portfolio return) Musumeci Capital Management has invested its portfolio as shown here. What is Musumeci's expected portfolio return?
B6. (Expected returnand risk) Procter & Gamble is considering three possible capital investment