Explore BrainMass

Explore BrainMass

    Microsoft Stock Expected Return

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

    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?

    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?

    © BrainMass Inc. brainmass.com October 10, 2019, 4:31 am ad1c9bdddf

    Solution Preview

    Please refer attached file for better clarity of formulas and tables.


    Risk Free rate=rf=4%
    Expected market return=rm=16%
    Expected return on stock=rf+b*(rm-rf)=18.40%


    Expected Return
    Probability, P Return(R) P*R
    0.1 ...

    Solution Summary

    There are two problems. Solution to first problem depicts the steps to calculate the expected return of a stock. Solution to second problem describes the steps to calculate mean and standard deviation of returns.