18. What is the standard deviation of the returns on a portfolio that is invested in stocks A, B, and C? 35 percent of the portfolio is invested in stock A and 50 percent is invested in stock C. State of Economy Probability of Returns if State Occurs State of Economy | Stock A Stock B Stock C Boom 10% 26% 9% 33% Normal 55% 12% 15% 22% Bust 35% -4% 28% -38%

18. What is the standard deviation of the returns on a portfolio that is invested in stocks A, B, and C? 35 percent of the portfolio is invested in stock A and 50 percent is invested in stock C. State of Economy Probability of Returns if State Occurs State of Economy | Stock A Stock B Stock C Boom 10% 26% 9% 33% Normal 55% 12% 15% 22% Bust 35% -4% 28% -38%

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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Accounting Use the following information: Stock A B Good state 12% 17% Bad state 0% -1% Assume there is 60% probability that the good state occurs and 40% chance the bad state occurs. What is the expected return of a portfolio that is 9% invested in stock A and 1-9% invested in B? (Please use 5 decimal places, this should be written in percentage return, so an answer of 23.143% should be written at .23143)
Based on this image, how many stocks does it take to eliminate most of the diversifiable risk?
11.2. Below are the expected returns from both stocks based on the probability of economic conditions. It is desired to create a portfolio from two stocks. It is decided to invest 30% in stock A and 70% in stock B. Stock A State (i) p(i) E(R) Recession 0.50 -40% Neutral 0.40 15% Boom 0.10 30% 1.00 Stock B State (i) p(i) E(R) Recession 0.5 40% Neutral 0.40 15% Вoom 0.1 -20% 1.00 d- Find the expected return and standard deviation of this portfolio? e- If you were a portfolio manager, what type of investors do you recommend this portfolio and why? f- Explain why the beta of the market is always equal to 1 and beta of a treasury bill equal to 0.
Consider the following data State of Nature Prob. Stock A Return Boom 0.3 16.00% Normal 0.6 14.20% Recession 0.1 8.00% What is the expected return for Stock A? Group of answer choices 14.12% 12.14% 15.12% 14.00%
Problem 1. The following are estimates for two stocks. Firm-Specific Standard Deviation 25% 40 Stock Expected Return Beta 7% A 0.90 1.30 B 11 The market index has a standard deviation of 24% and the risk-free rate is 4%. a) What are the standard deviations of stocks A and B? b) Suppose we build a portfolio with the following weights: 50% in stock A, 40% in stock B, and 10% in risk- free T-bills. Compute the expected return, standard deviation, beta, and nonsystematic standard deviation of the portfolio
ff2
5 Assume the historical volatility of a stock on the S&P 500 is 50% and the correlation between the returns of stock is 30% A. What is the average variance of stocks on the S&P? B. What is the average covariance of the stocks? C. Consider a portfolio of S&P stocks. What is the estimated volatility of the portfolio when there 10 stocks in the portfolio? What about 20 stocks in the portfolio?
State of economy Probability Rate of returns Stock A Stock B Stock C Boom 0.35 0.24 0.36 0.55 Normal 0.50 0.17 0.13 0.09 Bust 0.15 0 0.28 0.45 Based on the table above, you invested 40% on Stock A and B and 20% on Stock C. Calculate the expected return on this portfolio.
Suppose you bought $48,000 worth of stock A and $80,000 worth of stock B. The standard deviation of returns is 59% for stock A and 27% for stock B. The two stocks' returns have a correlation of 0.2. What is the standard deviation of this portfolio's returns? a. 15.2% b. 18.6% c. 23.6% O d. 26.9% O e. 30.4% QUESTION 10

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