18 eBook References A portfolio analyst has been asked to allocate investment funds among three different stocks. The relevant data for the stocks is shown in the following table. If the goal is to maximize return while maintaining risk within acceptable bounds (in this case, a portfolio standard deviation of no more than 20%), find the proper allocation of the funds to each stock. Stock A B C Return (R) 20% 10% 15% Pair of Stocks A to B A to C B to C What proportion of the portfolio should be allocated to stock B? Multiple Choice 0.039 Risk (Standard Deviation to S) 25% 12% 10% 0.021 Joint Risk (Covariance) 0.05 0.075 -0.05 4

18 eBook References A portfolio analyst has been asked to allocate investment funds among three different stocks. The relevant data for the stocks is shown in the following table. If the goal is to maximize return while maintaining risk within acceptable bounds (in this case, a portfolio standard deviation of no more than 20%), find the proper allocation of the funds to each stock. Stock A B C Return (R) 20% 10% 15% Pair of Stocks A to B A to C B to C What proportion of the portfolio should be allocated to stock B? Multiple Choice 0.039 Risk (Standard Deviation to S) 25% 12% 10% 0.021 Joint Risk (Covariance) 0.05 0.075 -0.05 4

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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еВook Problem Walk-Through Suppose you are the money manager of a $3.84 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $ 320,000 1.50 B 700,000 (0.50) 1,120,000 1.25 D 1,700,000 0.75 If the market's required rate of return is 9% and the risk-free rate is 6%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. %
Portfolio return and standard deviation Jamie Wong is thinking of building an investment portfolio containing two exchange traded funds (ETFs) Jamie plans to invest $2,000 in Vanguard S&P 500 ETF (VOO) and $8,000 in Invesco QQQ Trust (QQQ). Jamie has decided to analyze some historical returns to get a sense for her portfolio's possible future risk and return. Six years of historical annual returns for each ETF are shown in the following table: a. Calculate the portfolio return, rp, for each of the 6 years assuming that 20% is invested in VOO and 80% is invested in QQQ b. Calculate the average annual return for each ETF and the portfolio over the six-year period. c. Calculate the standard deviation of annual returns for each ETF and the portfolio. How does the portfolio standard deviation compare to the standard deviations of the individual ETFs? d. Calculate the correlation coefficient for the two ETFs. How would you characterize the correlation of returns of the two ETFs? e. Discuss…
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QUESTION 13 You have invested only in the BlueChip Fund, a mutual fund that invests mainly in stocks. At the moment, the BlueChip Fund has an expected return of 14% and a volatility of 36%. Your broker suggests you to consider adding the Platinum Fund to your current portfolio. The Platinum Fund has an expected return of 8%, a volatility of 24%, and a correlation of 0.25 with the BlueChip Fund. Risk-free interest rate is equal to 3%. The difference between the expected return and the required return on the Platinum Fund is closest to: O -0.005 0.134 0.032 0.210
8-7 PORTFOLIO REQUIRED RETURN Suppose you are the money manager of a $4.82 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $460,000 1.50 B 500,000 (0.50) C 1,260,000 1.25 D 2,600,000 0.75 If the market's required rate of return is 8% and the risk-free rate is 4%, what is the fund's required rate of return?
12
Problem 9-1 What must be the beta of a portfolio with Erg) = 17.4%, if re = 3% and En) = 15%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Beta of a portfolio
QUESTION 10 An investor wishes to construct a portfolio by borrowing 35 percent of his original wealth and investing all the money in a stock index. The return on the risk-free asset is 4.0 percent, and the expected return on the stock index is 15 percent. Calculate the expected return on the portfolio. a. 9.50 percent b. 18.25 percent c. 11.15 percent d. 15.00 percent e. 18.85 percent
An investor's portfolio consists of the following stocks: B. C. Required: A. Stock NCB BNS JBG GRACE LASD HBN % of Portfolio Beta 35 1.05 15 0.45 10 0.9 10 0.95 23 d 1.6 7 $0.7 Expected Return 21% * 10% 15% 18% 25% 9% d The current risk free rate of return is 6.5% and the expected return on the market portfolio is f 16%. to sastava 128 hodan) ditane H puo abuso gurILA be HOME D q now to Compute the expected return of the portfolio and the portfolio beta. Tynaquros ort vd bomenstem of dou Compute the required rate of return for the NCB stock using the Capital Asset Pricing Model (CAPM). bell (0 simo 15710 zib sh Explain the difference between diversifiable and non-diversifiable risks using examples.
eBook H Problem Walk-Through Suppose you are the money manager of a $4.48 million investment fund. The fund consists of four stocks with the following investments and betas: Investment $ 440,000 800,000 1,140,000 2,100,000 Beta 1.50 (0.50) 1.25 Stock A B C D 0.75 If the market's required rate of return is 13% and the risk-free rate is 6%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. %
4. Problem 8.07 (Portfolio Required Return) еВook Problem Walk-Through Suppose you are the money manager of a $4.04 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $ 220,000 1.50 B 800,000 (0.50) 1,020,000 1.25 D 2,000,000 0.75 If the market's required rate of return is 8% and the risk-free rate is 5%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. %

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