6. Consider stocks A and B with the following past returns: Month 1 2 4 A 7% 8% 4% 6% 4% 5% 8% 2% a. The contribution of stock B to the standard deviation of a portfolio composed of 60% A and 40% B equals: A. 0,6%; B. 1,4%; C. 2,4%; D. 0,4%; E. ...... b. The coefficient of correlation between A and B equals: A. -0, 3; B. -0,52; C. 0,52; D. 0,12;E. -0,4; F.

6. Consider stocks A and B with the following past returns: Month 1 2 4 A 7% 8% 4% 6% 4% 5% 8% 2% a. The contribution of stock B to the standard deviation of a portfolio composed of 60% A and 40% B equals: A. 0,6%; B. 1,4%; C. 2,4%; D. 0,4%; E. ...... b. The coefficient of correlation between A and B equals: A. -0, 3; B. -0,52; C. 0,52; D. 0,12;E. -0,4; F.

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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Current Attempt in Progress To achieve a zero standard deviation for a portfolio, calculate the weights of stock A and stock B, assuming the correlation coefficient is-1. Use the following information. (Round intermediate calculations and final answers to 2 decimal places, e.g. 31.21%.) State of the economy Probability of Expected return on Expected return on occurrence stock A in this state stock B in this state High growth 30% 41.5% 56.5% Moderate growth 25% 21.5% 26.5% Recession 45% -11.5% -21.5% Weight of stock A % Weight of stock B %
USE THE FOLLOWING DATA FOR QUESTIONS 4-6: A portfolio is equally invested in Stock A, Stock B, Stock C, and Treasury Bills (25% each). The expected returns of each of these holdings is 4.8%, 11.2%, 18.6%, and 3.0%, respectively. The Betas for each of the stocks is as follows: A 0.4, B 1.8, and C 2.6. Q6: Based on your answers to questions 4 and 5, assuming an expected return of the market of 8.5%, should you invest in this portfolio from a risk/reward perspective? Multiple Choice O O Yes No
Using the data in the following table, and the fact that the correlation of A and B is 0.48, calculate the volatility (standard deviation) of a portfolio that is 70% invested in stock A and 30% invested in stock B. (Click on the following icon in order to copy its contents into a spreadsheet.) Year 2008 2009 2010 2011 2012 2013 Realized Returns Stock A - 10% 20% 5% - 5% 2% 9% Stock B 21% 30% 7% - 3% - 8% 25% The standard deviation of the portfolio is %. (Round to two decimal places.)
8. A portfolio consists of bonds, stocks, commodities and real estates. The portfolio weightings, expected returns, variances and correlation matrix are shown below. Bonds Stocks Commodities Real Estate Correlation Matrix Bonds Stocks Commodities Real Estate Weight 50% 10% 15% 25% Bonds 1.0 Stocks -0.2 1.0 Expected Return 8% 12% 20% 16% Commodities 0.1 0.4 1.0 Variance (%²) 10 30 15 20 Real Estate 0.3 0.6 0.2 1.0 a. Calculate the expected return and the standard deviation of the return of the portfolio.
What is the standard deviation of a portfolio formed of shares A and B? Asset (A) E(R₂) = 9% SDA = 4% W₁ = 0.4 Select one: A. 4.99% B. 4.56% C. 3.68% D. 5.16 Asset (B) E(R₂) = 11% SDB = 6% WB = 0.6 COVA, B = 0.0011
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
Q4: Assume the following information for stocks A and B. • Expected return on Stock A = 18%. • Expected return on Stock B = 23%. • Correlation between returns of Stock A and Stock B = 0.10. • Standard deviation of returns on Stock A = 40%. • Standard deviation of returns on Stock B = 50%. Compute The expected return Standard deviation
The historical returns for the past three years for Stock B and the stock market portfolio are Stock B: 24 percent, 0 percent, 24 percent; market portfolio: 10 percent, 12 percent, 20 percent. Calculate the beta for Stock B. 1 1.17 1.13 0.86
6. The last four years of returns for a stock are as follows: Year Return 2 28.5% 1 - 4.2% a. What is the average annual return? b. What is the variance of the stock's returns? c. What is the standard deviation of the stock's returns? a. What is the average annual return? The average return is b. What is the variance of the stock's returns? The variance of the returns is 3 12.3% The standard deviation is %. (Round to two decimal places.) 3.6% c. What is the standard deviation of the stock's returns? (Round to five decimal places.) %. (Round to two decimal places.)
8. A portfolio consists of bonds, stocks, commodities and real estates. The portfolio weightings, expected returns, variances and correlation matrix are shown below. Weight Expected Return Variance (%2) Bonds 50% 10% 15% 25% 8% 12% 20% 16% 10 30 15 20 0.1 0.3 0.4 0.6 1.0 0.2 1.0 Stocks Commodities Real Estate Correlation Matrix Bonds 1.0 -0.2 1.0 Stocks Commodities Real Estate Bonds Stocks Commodities Real Estate Calculate the standard deviation of the return of the portfolio.
K A portfolio consisting of four stocks is expected to produce returns of 9%, -11%, 13% and 17%, respectively, over the next four years. What is the standard deviation of these expected returns? OA. 12.44% OB. 33.42% O C. 10.05% O D. 11.60%
Suppose that the average stock has a volatility of 58%, and that the correlation between pairs of stocks is 18%. Estimate the volatility of an equally weighted portfolio with: a. 1 stock b. 30 stocks c. 1,000 stocks

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