17. An analyst develops the following covariance matrix of returns:Hedge FundMarket IndexHedge Fund2561102iobni o Market Index110 ol sno no amunn to 81The correlation of returns between the hedge fund and the market index is closest to:A. 0.005.B. 0.073.С. 0.764.

Correlation between hedge fund and market index= Covariance between hedge fund and market…

17. An analyst develops the following covariance matrix of returns: Hedge Fund Market Index Hedge Fund 256 110 aiobi o Market Index 110 n to 81nyo no 2n The correlation of returns between the hedge fund and the market index is closest to: A. 0.005. B. 0.073.

17. An analyst develops the following covariance matrix of returns: Hedge Fund Market Index Hedge Fund 256 110 aiobi o Market Index 110 n to 81nyo no 2n The correlation of returns between the hedge fund and the market index is closest to: A. 0.005. B. 0.073.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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8. (Portfolio of two stocks) The following spreadsheet presents data for stocks A and B. A B C 1 2 RETURN STATISTICS OF STOCKS A AND B Stock A Stock B 3 Average return 15% 10% 4 Variance 0.12 0.07 5 Standard deviation 34.64% 26.46% 6 7 Covariance of return, Cov(AIB) 0.0160 0.1746 <=B7/(B5*C5) a. 8 Correlation of return What are the return and the standard deviation of a portfolio com- posed of 30% of stock A and 70% of stock B? b. What are the return and the standard deviation of an equally weighted portfolio of stocks A and B?
d. Interpret your results in (c) above, assuming that the historical average return of 8.5% from the stock is a good benchmark. e. Critically evaluate the strengths and weaknesses of applying the implied rate of return from the RIVM as a proxy of the expected return.
In the CAPM world, if Sharpe ratio of the market portfolio is 1.25 and the correlation coefficient between stock i and the market portfolio is 0.60, what is the stock i's Sharpe ratio? → (1) 0.25; (2) 0.45; (3) 0.50; (4) 0.75; (5) 0.80; (6) 1.00; (7) 1.25; 8 (8) 1.50; (9) 1.75; (10) 2.05;
Y8 Please answer
Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Common Stock B Probability Return Probability Return 0.35 13% 0.25 −7% 0.30 17% 0.25 8% 0.35 21% 0.25 15% 0.25 23% (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. Given the information in the table, the expected rate of return for stock A is enter your response here%. (Round to two decimal places.)
b. Consider the following information about three stocks: Probability of State of i. ii. iii. iv. State of Economy V. Boom Recession Economy 0.40 0.60 From the information given, you are required to answer the following questions. Compute the Standard Deviation for each stock. Compute the Coefficient Variation for each stock. Based on your computation in part (i) and (ii), which stock is riskier? Explain your answer. Rate of Return if State Occurs Stock Hang Stock Hang Jebat 7% 13% Tuah 28% (5%) Stock Hang Kasturi 15% 3% Assume that you have RM14,000 invested in Stock Hang Jebat whose beta is 1.5, RM19,000 invested in Stock Hang Kasturi whose beta is 2.5 and RM17,000 invested in Stock Hang Tuah whose beta is 1.6. Determine what is the beta of this portfolio. Based on your answer in part (iv), compute the required rate of return for this portfolio, given that the market rate of return is 13% and risk-free rate is 5%.
Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10% 8% 2 0.20 13% 7% 3 0.20 12% 6% 4 0.30 14% 9% 5 0.20 15% 8% The coefficient of correlation between A and B is:
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio Y Z Market Risk-free Rp 16.00% бр 32.00% 15.00 27.00 7.30 17.00 11.30 5.80 22.00 0 Bp 1.90 1.25 0.75 1.00 0 Assume that the tracking error of Portfolio X is 13.40 percent. What is the information ratio for Portfolio X? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places. Information ratio
Assume that using the Security Market Line(SML) the required rate of return(RA)on stock A is found to be halfof the required return (RB) on stock B. The risk-free rate (Rf) is one-fourthof the required return on A. Return on market portfolio is denoted by RM. Find the ratioof betaof A(A) tobeta of B(B). Thank you for your help.
K -61 =1 2 N (Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Probability 0.25 0.50 0.25 Common Stock A Probability 0.25 0.25 0.25 0.25 (Click on the icon in order to copy its contents into a spreadsheet.) @ 2 a. Given the information in the table, the expected rate of return for stock A is 16.25 %. (Round to two decimal places.) The standard deviation of stock A is %. (Round to two decimal places.) b. The expected rate of return for stock B is%. (Round to two decimal places.) The standard deviation for stock B is%. (Round to two decimal places.) c. Based on the risk (as measured by the standard deviation) and return of each stock, which investment is better? (Select the best choice below.) 30² F2 W OA. Stock A is better because it has a higher expected rate of return with less risk B. Stock B is…
Vijay
b. As an equity portfolio manager, you may use certain risk-adjusted performance measures. Describe and discuss the following measures of performance evaluation! Treynor Index, William Sharpe, Michael Jensen Using the following table evaluate which is better than other using three different measure of performance evaluation. Asset X E(R)% 12 beta Stdv 1.25 16 Y 11 1.0 12 Risk-free 3 0 0 Market index 12 1 12

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