9. Given: EXR₁).10 E(R₂) 15 01.03 01-05 Calculate the expected returns and expected standard deviations of a two-stock portfolio in which Stock I has a weight of 60 percent under the following conditions: a. P1.2-1.00 b.2-0.75 C.PL₂-0.25 d. nu-0.00 0.₁2 -0.25 f.1-0.75 82-1.00 Calculate the expected returns and expected standard deviations of a two-stock portfolio having a correlation coefficient of 0.70 under the following conditions: a. w-1.00 b. w₁ -0.75 c. Wy=0.50 d. w₁ -0.25 c. w -0.05 E(R₁)=0.12 E(R) 0.16 0₁-0.04 0₂-0.06 Plot the results on a return-risk graph. Without calculations, draw what a curve with varying weights would look like if the correlation coefficient had been 0.00, or if it had been -0.70. 10. Given:

9. Given: EXR₁).10 E(R₂) 15 01.03 01-05 Calculate the expected returns and expected standard deviations of a two-stock portfolio in which Stock I has a weight of 60 percent under the following conditions: a. P1.2-1.00 b.2-0.75 C.PL₂-0.25 d. nu-0.00 0.₁2 -0.25 f.1-0.75 82-1.00 Calculate the expected returns and expected standard deviations of a two-stock portfolio having a correlation coefficient of 0.70 under the following conditions: a. w-1.00 b. w₁ -0.75 c. Wy=0.50 d. w₁ -0.25 c. w -0.05 E(R₁)=0.12 E(R) 0.16 0₁-0.04 0₂-0.06 Plot the results on a return-risk graph. Without calculations, draw what a curve with varying weights would look like if the correlation coefficient had been 0.00, or if it had been -0.70. 10. Given:

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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Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .092, E(RB) = 152, OA = .362, and og = .622. Calculate the expected return of a portfolio that is composed of 37 percent A and а-1. 63 percent B when the correlation between the returns on A and B is .52. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Calculate the standard deviation of a portfolio that is composed of 37 percent A and 63 percent B when the correlation coefficient between the returns on A and B is .52. а-2. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Calculate the standard deviation of a portfolio with the same portfolio weights as in part (a) when the correlation coefficient between the returns on A and B is -.52. (Do b. not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Suppose securities A, B, and C have the following expected return and risk. Stock Expected return Risk A 8% 6% B 7% 9% C 13% 9% What is the coefficient of variation for stock A?
1. If a stock has a(Alpha)=0.002, b(Beta)=1.4, Using the market model (eq. 7.4), find the expected percent return for the above stock if the market return is expected to be 2% and the risk free rate is 1%. 2. Assume stock prices follow a random walk and a particular stock has had the following recent stock prices: Day 1: 129.5 Day 2: 126.9 Day 3: 127.1 what is the best estimate of day 4 prices?
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%
Q6-Suppose that the rate of return on investment- free has risk %8 and the expected return rate for the market %14. If the particular stock his given B = 0.60 - What is the expected return rate based on CAPM? -How much the Beta of another stock that has required return 0.20 ?
Use the following information: Stock A B Good state 10% 14% Bad state 2% -2% Assume there is 60% probability that the good state occurs and 40% chance the bad state occurs. What is the standard deviation of stock A? (Please use 5 decimal places, this should be written in percentage, so an answer of 23.143% should be written as .23143)
Assume the expected return on the market is 9 percent and the risk-free rate is 4 percent. What is the expected return for a stock with a beta equal to 1.80? (Round answers to 2 decimal places, e.g. 15.25.) What is the market risk premium? (Round answers to 2 decimal places, e.g. 15.25.)
Suppose you are given the following information about 2 stocks, what is the expected return of a portfolio weighted 55% in stock A and 45% in stock B? E(RA)=16% E(RB)=8% σA=22% σB=12% σA,B=−0.003696 Enter rate in decimal form, rounded to 4th digit, as in "0.1234"
Compute the abnormal rates of return for the following stocks during period t (ignore differential systematic risk): Stock % % % % BFT % B F T UE Rit = return for stock i during period t Rmt = return for the aggregate market during period t Use a minus sign to enter negative values, if any. Round your answers to one decimal place. ARBE: ARF: ARTI: ARC: AREL: с Rit 11.5% 9.2 12.5 12.5 15.9 Rmt 4.7% 6.2 6.6 15.2 11.1
Using the CAPM, estimate the appropriate required rate of return for the three stocks listed here, given that the risk-free rate is 4 percent and the expected return for the market is 17 percent. STOCK BETA A 0.63 B 0.95 C 1.48 a. Using the CAPM, the required rate of return for stock A is B.Using the CAPM, the required rate of return for stock b is C.Using the CAPM, the required rate of return for stock C is (Round to two decimal places.)
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA= 5.0% + 1.30RM + eA RB= -2.0% + 1.6RM + eB sigmaM= 20% ; R-squareA= 0.20 ; R-squareB= 0.12 What is the standard deviation of each stock (write as percentage, rounded to 2 decimal places)?
Find the Beta for Stock Y given the Expected Return of Stock Y is 18.4% The expected return on the Market Portfolio is 28.4% and Risk-Free Rate is 4.5 %. Select one: O a. 0.60 O b. 0.90 O c None O d. 0.56 O e. 0.80

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