5. The following data is given about stocks A, B, and C. You have a portfolio with an expected return of 15%. What is the standard deviation of the portfolio if 30% of the total investment is in StockE? Retum and Risk Retum Correlations A. B Stock 0.40 -0.20 50% 40% 30% A 25% 1.00 0.40 1.00 -0.50 15% 5% -0.20 -0.50 1.00

5. The following data is given about stocks A, B, and C. You have a portfolio with an expected return of 15%. What is the standard deviation of the portfolio if 30% of the total investment is in StockE? Retum and Risk Retum Correlations A. B Stock 0.40 -0.20 50% 40% 30% A 25% 1.00 0.40 1.00 -0.50 15% 5% -0.20 -0.50 1.00

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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The following are estimates for two stocks. Firm- Specific Expected Standard Stock Return Beta Deviation A 14% 0.90 30% B 21 1.40 42 The market index has a standard deviation of 20% and the risk-free rate is 7%. Required: a. What are the standard deviations of stocks A and B? b. Suppose that we were to construct a portfolio with proportions: Stock A Stock B T-bills 0.30 0.45 0.25 Compute the expected return, beta, nonsystematic standard deviation, and standard deviation of the portfolio.
An investor has the following expectations on the performance of Stock X and Stock Y: Probability Scenario Returns (%) Stock X Stock Y 0.20 Good 50% 14% 0.50 Average 30% 6% 0.30 Bad -10% 6% Estimate the portfolio return with an allocation of 70:30 (X:Y) in the two stocks. Select one: O a. 11.92% ОБ. 14.80% O. 32.00% O d. 17.68% Following Question 18, estimate the correlation coefficient between the two stocks. Select one: O a. 0.63 оъ. 0.46 O c. 0.84 O d. 0.76 Following Question 18 and 19, estimate the portfolio standard deviation with an allocation of 40:60 in these two stocks. Select one: O a. 9.6% о ь. 10.8% O c. 10.2% O d. 9.2%
Suppose a portfolio is given as follows: Securities Weight BPW CJW AJT O 6.0% O 5.0% 0.3 O 5.1% 0.4 O 7.0% Onone listed Expected Standard Return Deviation 6% 7% 0.3 5% What is the expected return of the portfolio (to 1 decimal place)? 6% 4% 3%
4. Consider the following information. Your portfolio is invested 30 percent each in A and C, and 40 percent in B. What is the expected return and standard deviation of this portfolio? (10 marks) State of Probability of Rate of Return if State Occurs Economy State of Economy Stock A Stock B Stock C Boom 0.15 0.30 0.45 0.33 Good 0.45 0.12 0.10 0.15 Poor 0.35 0.01 -0.15 -0.05 Bust 0.05 -0.06 -0.30 -0.09
Assume that the following data available for the portfolio, calculate the expected return, variance and standard deviation of the portfolio given stock A accounts for 45% and stock B accounts for 55% of your portfolio? (4 marks) A B Expected return 12.5% 18.5% Standard Deviation of return 15% 20% Correlation of coefficient (p) 0.4
10. Share A and share B has the below returns. Rate of return (%) Rate of return (%) Share A Share B 3 5 7 9 10 8 -3 5 (d) Calculate for each share: iii. Mean returns. iv. Standard deviation of returns. (e) You decided to invest 70% in Share A and 30% in Share B. Calculate your portfolio return and the portfolio risk.
1. A stock has a beta of 1.15 and an expected return of 14 percent. A risk-free asset Currently earns 4.2 percent. a . What is expected return on a portfolio that is equally in inverted assets? b. if portfolio of the two assets has beta of 75, what are the portfolio weights? C. if a portfolio of the two assets has an expected return of 8 percent .what is its beta? the two
Consider the following information on a portfolio of three stocks: State of Economy Probability of State of Economy Stock A Rate of Return Stock B Rate of Return Stock C Rate of Return Boom.13.02.32.50 Normal.55.10.22.20 Bust .32.16.21.35 If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance, and the standard deviation? Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., 16161. Enter your other answers as a percent rounded to 2 decimal places, e. g., 32.16. If the expected T-bill rate is 4.25 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.
Nikul
You are analyzing a stock that has a beta of 1.3 and a standard deviation of 12.0%. The risk-free rate is 4.2% and you estimate the expected return on the market portfolio to be 11.1%. What return do you expect this stock to have? The expected return according to CAPM is: OA. 13.2% B. 14.3% OC. 19.8% OD. 18.6% OE 12.0% OF. 14.4% OG. 9.8% OH. 8.7% OL 9.0%
The risk-free rate is 3 percent. Also, the expected return on the market portfolio is 10.5 percent.a. Calculate the expected return of your portfolio. (Hint: The expected return of a portfolio equals the weighted average of the individual stocks" expected returns, where the weights are the percentage invested in each stock.)b. Calculate the portfolio beta.c. Given the preceding information, plot the security market line on paper. Plot the stocks from your portfolio on your graph.d. From your plot in part c, which stocks appear to be your winners, and which ones appear to be your losers?e. Why should you consider your conclusion in part d to be less than certain?
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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