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6- The stock of Business Adventures sells for $80 a share. Its likely dividend payout...

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Accounting

6- The stock of Business Adventures sells for $80 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:

Stock Price

Dividend

Recession

$76

$0.75

Normal economy

82

2.50

Boom

87

3.00

A- 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 3%.

B- Calculate the expected holding-period return and standard deviation of the holding-period return. All three scenarios are equally likely.

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