acoma Corp.'s stock is $42 per share. Its expected return is 23% and variance is 15%. Element Corp.'s stock is $21 per share. Its expected return is 10% and variance is 6%. Sedes Corp.'s stock is $48 per share. Its expected return is 12% and variance 7%. What would be the expected return of a portfolio consisting of 20.00% Tacoma and 80.00% Element? O 12.60% O 2.52% 6.30% O 15.00% O 10.08%

acoma Corp.'s stock is $42 per share. Its expected return is 23% and variance is 15%. Element Corp.'s stock is $21 per share. Its expected return is 10% and variance is 6%. Sedes Corp.'s stock is $48 per share. Its expected return is 12% and variance 7%. What would be the expected return of a portfolio consisting of 20.00% Tacoma and 80.00% Element? O 12.60% O 2.52% 6.30% O 15.00% O 10.08%

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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Zacher Co.'s stock has a beta of 1.40, the risk-free rate is 4.25%, and the market risk premium is 5.50%. What is the firm's required rate of return? a. 11.36% b. 11.65% c. 11.95% d. 12.25% e. 12.55%
5. A two-asset portfolio is made up of 80% of Share A, for which the variance is 50, and 20% of Share B, with variance 60. The covariance between the two shares is 25. What is the standard deviation of the two-asset portfolio? A) 8.54% B) 9.63% C) 6.51% D) 7.23%
Silver Industries' Y shares have an expected return of 15%, a beta coefficient of 0.8 and a standard deviation of expected returns of 31%. The company's Z shares have an expected return of 11.3%, a beta coefficient of 1.5 and a standard deviation of 25%. The risk-free rate is 5% and the market risk premium is 4%.d. Explain which stock might be more attractive to investors. e. Calculate the return on a portfolio that has $9,200 invested in stock "Y" and $3,500 invested in stock "Z".f. Suppose the market risk premium increases to 7%, which stock would have a higher return?
Following is the information is available for company Xian and Yancheng, RX =25%,RY=35%,X=15%,Y=20% 5. a) What is the expected return and standard deviation for a portfolio composed of 70 per cent of Yancheng and 30 per cent of Xian assuming a correlation coefficient of – 0.50 between two shares? b) Whatwillbetheexpectedreturnandstandarddeviationforaboveportfolioifthese two shares are perfectly negatively correlated with each other?
Silver Industries' Y shares have an expected return of 15%, a beta coefficient of 0.8 and a standard deviation of expected returns of 31%. The company's Z shares have an expected return of 11.3%, a beta coefficient of 1.5 and a standard deviation of 25%. The risk-free rate is 5% and the market risk premium is 4%. a. Determine the coefficient of variation of each stock. b. Explain which stock is more risky for diversified investors. c. Calculate the expected rate of return for both stocks.
Assume that the risk-free rate of return is 4% and the market risk premium (ie., Rm- Rf) is 89%. If use the Capital Asset Pricing Model (CAPM) to estimate the expected rate of return on a stock with a beta of 128, then this stock's expected retum should be ---- A) 10.53% B) 14.24% 23.15% D) 6.59%
Tyler Trucks stock has an annual return mean and standard deviation of 12.5 percent and 46 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 12.0 percent and 46 percent, respectively. Your portfolio allocates equal funds to Tyler Trucks stock and Michael Moped Manufacturing stock. The return correlation between Tyler Trucks and Michael Moped Manufacturing is -.50. What is the smallest expected loss for your portfolio in the coming month with a probability of 1.0 percent? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places. Smallest expected loss %
Suppose Johnson & Johnson and the Walgreen Company have the expected returns and volatilities shown below, with a correlation of 22.4%. Johnson & Johnson Walgreen Company E [R] 6.5% 10.7% SD [R] 15.5% 19.9% For a portfolio that is equally invested in Johnson & Johnson's and Walgreen's stock, calculate: a. The expected return. b. The volatility (standard deviation). a. The expected return. The expected return of the portfolio is %. (Round to one decimal place.)
You are examining three different shares. Share A has expected return 8.00%, beta 0.74, and volatility 31.00%. Share B has expected return 5.40%, beta 0.45, and volatility 13.00%. Finally, share C has expected return 7.20%, beta 0.56, and volatility 27.00%. The risk free rate is 2.70%, while the market price of risk is 7.60%. According to the CAPM, which share is undervalued?
You construct a two-stock portfolio using stock A and stock B. You invest $700 in stock A and $300 in stock B. The return standard deviation of stock A is 15%, that of stock B is 20%, and the return correlation coefficient between stock A and stock B is 0.6. The return standard deviation of your portfolio is _____. 13.57% 14.89% 16.50% 17.50%
You are examining three different shares. Share A has expected return -0.30%, beta -0.49, and volatility 29.00%. Share B has expected return 9.80%, beta 1.09, and volatility 24.00%. Finally, share C has expected return 8.60%, beta 0.88, and volatility 13.00%. The risk free rate is 2.70%, while the market price of risk is 7.00%. According to the CAPM, which share is undervalued?
Suppose an investor wants to invest either in the common stock of Square Corporation or Beximco Corporation. Square Corporation offers investors an expected rate of return equal to 39%, with a standard deviation of 20%. Square offers a higher expected return than Beximco Corporation (the expected rate of return equals 31%, and the standard deviation equals 18%), but it is also riskier. The variance for Square Corporation is 400, and Bexlmco Corporation is 324. Concerning both risk and return, which corporation has lower risk per unit of return, and which investment would be the better investment? Why? Show calculation and explain with necessary numerical data.

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