A1 Data for Two Stocks23BCDEFGHJK2. Use the Excel file Data for Two Stocks to determine the following:a. Using EXCEL's Data Table Feature, create a one-way data table that determines thedifferent means and standard deviations for portfolios consisting of combinations ofStock A and Stock B by varying the correlation coefficient value between Stock A andStock B through the full range of possible correlation coefficient values. Use incrementsof 0.10 for the possible correlation coefficient values.b. Graph the correlation coefficients, the means, and the standard deviations of theportfolios from the one-way data table. Be sure to include a title for the graph and labelthe axes.c. Use Excel's Text Box Feature to explain how the portfolio means are affected bychanging the correlation coefficient values.d. Use Excel's Text Box Feature to explain how the portfolio standard deviations areaffected by changing the correlation coefficient values.45 Expected returnAB7.00%10.00%6 Variance of return0.560.747 Standard deviation of return8 Correlation74.83%0.7886.02%910 Proportion of A0.62111213141516171892 2919

Exploring Portfolio Characteristics using Excel Data TableHere's a breakdown of how to use Excel's…

Answered: A 1 Data for Two Stocks 2 3 B C D E F G…

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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Hello, which table would I use to find the ratio of exchange in a stock? I'm attaching the tables, but I'm not sure which table to use. Also, what would be the formula to use when doing that on an excel template?
If the standard deviation of stock 'A' is .25, the standard deviation of stock 'B' is .30, and the correlation between stocks 'A' and 'B' is 0.7, the covariance between stocks 'A' and 'B' is___.
1. Consider the three stocks in the following table. P, represents price at time t, and Q, represents shares outstanding at time t. Calculate the rates of return on the following indexes of the three stocks: A B с Po 90 50 100 a. A market-value-weighted index. b. An equally weighted index. Qo 100 200 200 P₁ 95 45 110 Q₁ 100 200 200
Q1) The covariance between stocks A and B is 0.0014, standard deviation of stock A is 0.032, and standard deviation of stock B is 0.044. Which of the following is the most appropriate to depict the risk-return characteristics of a portfolio consisting of only stocks A and B, and explain why? (Image attached as Q)
financial advisor evaluates four stocks for inclusion in an investor's portfolio. A orrelation matrix showing each stock's correlation with the other stocks is shown below Stock ALK CMN BTY DLE ALK 0.40 0.58 1.00 -0.25 BTY 0.40 1.00 0.16 -0.04 CMN -.25 .16 1.00 .37 DLE .58 .04 .37 1.00 f the goal is to reduce the investor's overall portfolio risk, which two stocks should the advisor recommend? a. ALK and DLE b. ALK and CMN c. BTY and DLE BTY and CM
8. (Portfolio of two stocks) The following spreadsheet presents data for stocks A and B. A B C 1 2 RETURN STATISTICS OF STOCKS A AND B Stock A Stock B 3 Average return 15% 10% 4 Variance 0.12 0.07 5 Standard deviation 34.64% 26.46% 6 7 Covariance of return, Cov(AIB) 0.0160 0.1746 <=B7/(B5*C5) a. 8 Correlation of return What are the return and the standard deviation of a portfolio com- posed of 30% of stock A and 70% of stock B? b. What are the return and the standard deviation of an equally weighted portfolio of stocks A and B?
Consider the following probability distribution for stocks A and B: Table 4 Probability Distribution for Stocks A and B State Probability Return on Stock A Return on Stock B 1 0.1 10% 8% 2 0.2 13% 7% 3 0.2 12% 6% 4 0.3 14% 9% 5 0.2 15% 8% The variances of Stocks A and B are _____ and _____, respectively. Group of answer choices .015%; .019% .022%; .012% .032%; .02% .015%; .011% .014%; .021%
Consider the two stocks below. Which has a positive beta (i.e., tends to move in the same direction as the market)? Which has a higher R2 (1.e., market returns explain more of its return patterns)? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. Stock 1 has a positive beta and a higher R² a b C d Stock 2 has a positive beta and a higher R² Stock 1 has a positive beta, but Stock 2 has a higher R Stock 2 has a positive beta, but Stock 1 has a higher R² ft RM Stock 2 Stock 1 Par
The market and Stock J have the following probability distributions: Probability rM rJ 0.3 15.00 % 19.00 % 0.4 10.00 6.00 0.3 18.00 10.00 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet Calculate the expected rate of return for the market. Do not round intermediate calculations. Round your answer to two decimal places.fill in the blank %Calculate the expected rate of return for Stock J. Do not round intermediate calculations. Round your answer to two decimal places.fill in the blank % Calculate the standard deviation for the market. Do not round intermediate calculations. Round your answer to two decimal places.fill in the blank %Calculate the standard deviation for Stock J. Do not round intermediate calculations. Round your answer to two decimal places.fill in the blank %
b. Consider the following information about three stocks: Probability of State of i. ii. iii. iv. State of Economy V. Boom Recession Economy 0.40 0.60 From the information given, you are required to answer the following questions. Compute the Standard Deviation for each stock. Compute the Coefficient Variation for each stock. Based on your computation in part (i) and (ii), which stock is riskier? Explain your answer. Rate of Return if State Occurs Stock Hang Stock Hang Jebat 7% 13% Tuah 28% (5%) Stock Hang Kasturi 15% 3% Assume that you have RM14,000 invested in Stock Hang Jebat whose beta is 1.5, RM19,000 invested in Stock Hang Kasturi whose beta is 2.5 and RM17,000 invested in Stock Hang Tuah whose beta is 1.6. Determine what is the beta of this portfolio. Based on your answer in part (iv), compute the required rate of return for this portfolio, given that the market rate of return is 13% and risk-free rate is 5%.
Given the following information on five stocks, construct: a. A simple price-weighted average b. A value-weighted average c. A geometric average d. What is the percentage increase in each average if the stock prices change to those in Column I? e. What is the percentage increase in each average if the stock prices change from those in the Price column to those in Column II? f. Why were the percentage changes different in parts (d) and (e)? g. If you were managing a fund and wanted a source to compare your results to, which of the three averages would you prefer to use, and why? Stock Price # of Shares I II A B C D E F $12.00 150,000 $14.00 125,000 $11.00 200,000 $ 22.00 80,000 $8.00 30,000 $29.00 140,000 $12.00 $12.00 $14.00 $14.00 $20.00 $11.00 $ 22,00 $ 22.00 $8.00 $15.00 $29.00 $29.00
Q1: Explain the meaning and significance of a stock's beta coefficient. Illustrate your explanation by drawing, on one graph, the characteristic lines for stocks with low, average, and high risk. (Hint: Let your three characteristic lines intersect at r_i=r_m=6%, the assumed risk-free rate.) Q2: Define the following terms, using graphs or equations to illustrate your answers where feasible. a) Risk, stand-alone risk b) Expected rate of return c) standard deviation, variance d) risk premium for stock i, market risk premium e) Capital Asset Pricing Model (CAPM) f) Expected return on a portfolio g) market risk, diversifiable risk h) Beta i) Security Market Line; SML equation j) Slope of SML and its relationship to risk aversion. Q3. Differentiate between (a) stand-alone risk and (b) risk in a portfolio context. How are they measured, and are both concepts relevant for investors? Q4. Can an investor eliminate market risk from a portfolio of common stocks? How many stocks must a portfolio…

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