Chapter 15 sec

Suppose you visit with a financial adviser, and you are considering investing some of your wealth in one of three investment portfolios: stocks, bonds, or commodities. Your financial adviser provides you with the following table, which gives the probabilities of possible returns from each investment: Stocks Bonds Commodities Probability Return Probability Return Probability Return 20% 15% 0.15 20% 0.6 10% 0.2 0.2 12.5% 0.4 7.5% 0.2 0.25 0.2 0.4 3.8% 0.2 0.2 0% To maximize your expected return, you should choose O A. commodities. B. bonds. OC. stocks. OD. All of the portfolios have the same expected return

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Question: You are an investment advisor. You currently own two stocks, A and B, with the following characteristics:   Expected Return Beta X 10% 0.8 Y 16% 1.5 The current risk-free rate is 2 percent, and the expected return on the market is 12 percent. How would you change your holdings of the two stocks (i.e., for each, would you sell or buy more)? Show your calculations (and explain). Stock A:     Stock B:

Question 1 e) As a risk averse investor Lawrence will only invest in the portfolio if it has a coefficient of variation that is below 0.75. Should Lawrence invest in the portfolio, please provide reason(s) to support your response? f) Assume in 2020 the estimated rate of return of the T&T Stock Exchange Composite Index for the upcoming year was 8%, and the estimated return on a 1-year treasury note for the upcoming year was 2%. Using the beta of each security shown in Table 1 above and the market expected returns calculate an expected rate of return for each security

Question 6 Suppose that an investor has £1,000,000 to invest in a portfolio containing stocks A, B and a risk-free asset. The investor must invest all her money, and she is using the Capital Asset Pricing Model (CAPM) to make predictions of the expected return-beta relationship. Her objective is to create a portfolio that has an expected return of 14% and which has a beta of 0.75. If stock A has an expected return of 30% and a beta of 1.9, stock B has an expected return of 20% and a beta of 1.4, and the risk-free rate is 8%, how much money will she invest in stock A? Explain your answer and show your calculations.

You want to create a portfolio equally as risky as the market, and you have $5M to invest. Given the information below, what is your investment in the risk-free asset? Asset Stock A Stock B Stock C Risk-free Asset $0.8M $0.7M $0.9M $1.1M Investment $1M $2M Beta 0.7 1.25 1.5

* All three subparts please* You are trying to plan your investments for the next year. You havedecided that the market will either be strong (a bull market), weak (abear market) or normal. You think that stocks, bonds, and bills will earnthe following returns in these scenarios in the table. You have a risk-aversion (A) of 8. a) What is the expected return for each of the securities? b) What is the volatility of each security return? c) What is the covariance between stock and bond returns?

Risk and Rates of Return; Risk in Portfolio Context You are holding a investments and the portfilio with the following Stock A B C D Total Investament Dollar Investment $250,000 150,000 400,000 200,000 $1,000,000 Beta 1.20 1.60 0.85 -0.15 The market's required return is 11% and the risk-free rate is 4%. What is the portfolio's required return? Round your answer to three places. decimal

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For DePaul Inc. what is the return for year 2. Round to no decimal points and use the % symbol (27%...not 27.12%)

Beta coefficients and the capital asset pricing model Suppose you are wondering how much risk you must undertake to generate an acceptable return on your investment portfolio. The risk-free return currently is 3%. The return on the overall stock market is 12%. Use the CAPM to calculate how high the beta coefficient of your investment portfolio would have to be to achieve each of the following expected portfolio returns. a.13% b. 25% c. 16% d. 18% e. Assume you are averse to risk. What is the highest return you can expect if you are unwilling to take more than an average risk?

Risk return exercise : D2L Assessment #7 DePaul, Inc. You are searching for a stock to add to your current stock portfolio. You are interested in DePaul, Inc. You realize that any time you consider a technology stock, it involves elevated risk. The rule you follow is to include only stocks with a coefficient of variation of returns below 1.02. You have obtained the following price information and dividend information: Year Starting Price $40.00 Ending price Quarterly Dividend 1 $42.00 $0.50 $42.00 $47.40 $0.75 3 $47.40 $43.40 $1.00 4 $43.40 $53.40 $1.25 a. Calculate the annual rate of return for each year, 1 through 4, for DePaul stock b. Assume that each year's return is equally probable and calculate the average return over this time period. Calculate the standard deviation of returns over the 4 years. Based on b and c determine the coefficient of variation of returns for the security. Does an investment in this stock fall within the parameters of your investment policy? С. d. e.

What is the correct answer ? A B ? General Accounting question

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QUESTION 3 Leon has in his investment a portfolio that paid him the rate of returns of 14 %, -13%, 15.6%, 17% and 19.5% over the past five years. Required: a) Calculate the arithmetic average return (AAR) and geometric average return (GAR) of the portfolio? If someone asks you what is the actual compounding rate of return of Leon's portfolio over the past five year, which one (AAR or GAR) will be a better answer? b) Following is forecast for economic situation and Leon's portfolio returns next year, calculate the expected return, variance and standard deviation of the portfolio. . State of economy Probability Rate of returns Mild Recession 0.25 -2.5% Normal 0.45 13.5% Growth 0.30 20% c) Assume that expected return of the stock A in Leon's portfolio is 13.2%. Beta of this stock is 1.2, risk free rate is 3.5%. Calculate market portfolio rate of return, which is used to compute the expected return of this stock by Capital Asset Pricing Model (CAPM)?

You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock A B с Investment Beta $202,000 303,000 505,000 Beta of the portfolio 1.59 Expected rate of return 0.59 Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 15 percent and that the risk-free rate is 7 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%.) 1.16 %

You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock. Investment A B C $224,000 336,000 560,000 Beta of the portfolio Beta Expected rate of return 1.50 0.60 Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 16 percent and that the risk-free rate is 8 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%.) 1.35 do % SUPP

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PLZ Show the formula step by step-The colleague has given you his forecasts of stocks A and B as follows: State Probability Expected rate ofReturns on Stock A Expected rate ofReturns on Stock B Boom 0.7 0.40 -0.10 Bust 0.3 -0.05 0.30 She would like to invest 80% of his money in stock A and 20% of her money in stock B to construct a portfolio.A) Calculate the portfolio's expected rate of returns and its standard deviation.

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