Cheyenne holds a $7,500 portfolio that consists of four stocks. Her investment in each stock, as well as each stock's beta, is listed in the fo table: Stock Omni Consumer Products Co. (OCP) Tobotics Inc. (TI) Water and Power Co. (WPC) Makissi Corp. (MC) OOmni Consumer Products Co. O Makissi Corp. Tobotics Inc. Suppose all stocks in Cheyenne's portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? Water and Power Co. O Makissi Corp. Water and Power Co. Investment Beta $2,625 0.90 $1,500 1.90 $1,125 1.20 $2,250 Omni Consumer Products Co. 0.30 Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk? O Tobotics Inc. Standard Deviation 9.00% 12.00% 18.00% 28.50%

Cheyenne holds a $7,500 portfolio that consists of four stocks. Her investment in each stock, as well as each stock's beta, is listed in the fo table: Stock Omni Consumer Products Co. (OCP) Tobotics Inc. (TI) Water and Power Co. (WPC) Makissi Corp. (MC) OOmni Consumer Products Co. O Makissi Corp. Tobotics Inc. Suppose all stocks in Cheyenne's portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? Water and Power Co. O Makissi Corp. Water and Power Co. Investment Beta $2,625 0.90 $1,500 1.90 $1,125 1.20 $2,250 Omni Consumer Products Co. 0.30 Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk? O Tobotics Inc. Standard Deviation 9.00% 12.00% 18.00% 28.50%

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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Jaleel is holding some Tesla shares (NASDAQ: TSLA) and The TSLA stocks arecurrently trading at $985 on the Nasdaq. Given TSLA stocks are very volatile, Jaleelwishes to protect the value of his investments. He seeks your advice on using optioncontracts and presents a list of options for you to choose from. Assume the number ofunderlying shares per contract is 100 shares.Please specify the moneyness of the image options. Are they in the money, atthe money, or out of the money?Identify what kind of risk Jaleel is facing and to hedge this risk, which optionwould you suggest that Jaleel should purchase? Why?
Mariam owns 30 shares of Stock X which has a price of $340 per share and 80 shares of Stock Y which has a price of $3500 per share. What is the proportion of Mariam’s portfolio invested in stocks X and Y? If stock X's return is 10 percent and stock Y's return is 20 percent what is the portfolio's return?
Wendy purchased 800 shares of Genetics Stock at $15 per share on 1/1/12. Wendy sold the shares on 12/31/12 for $10. Genetics stock has a beta of 0.58, the risk-free rate of return is 0.031, and the market risk premium is 9%. Wendy's holding period return is Instruction: Type your answer as a decimal, and round to three decimal places
Juanita holds a $7,500 portfolio that consists of four stocks. Her investment in each stock, as well as each stock’s beta, is listed in the following table: Stock Investment Beta Standard Deviation Omni Consumer Products Co. (OCP) $2,625 0.90 9.00% Tobotics Inc. (TI) $1,500 1.90 11.00% Three Waters Co. (TWC) $1,125 1.10 18.00% Flitcom Corp. (FC) $2,250 0.30 28.50% Suppose all stocks in Juanita’s portfolio were equally weighted. The stock that would contribute the least systematic risk to the portfolio is ? . Further, if all of the stocks in the portfolio were equally weighted, the stock that would have the least amount of unsystematic risk is ? . If the risk-free rate is 5.00% and the market risk premium is 7.50%, then Juanita’s portfolio will exhibit a beta of ? and a required return of ?.
Penny inherited a $200,000 portfolio of investments from her grandparents when she turned 21. The portfolio is comprised of treasury bills and stock in Ford and Harley Davidson as follows. Based on the current portfolio composition and the expected returns, what is the expected rate of return for Penny's portfolio? a. 7.8% b. 8.7% c. 7.0% d. 8.0% a.. b.. C. d.. Treasury Bills Ford Harley Davidson Expected Return 4.5% 8.0% 12.0% $ A A A $ $ $ Value 80,000.00 60,000.00 60,000.00
Ian owns a two-stock portfolio that invests in Blue Llama Mining Company (BLM) and Hungry Whale Electronics (HWE). Three-quarters of Ian's portfolio value consists of BLM's shares, and the balance consists of HWE's shares. Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Probability of Occurrence 0.25 0.45 0.30 Strong Normal Weak Blue Llama Mining Hungry Whale Electronics 40% 56% 24% 32% -40% -32% Calculate expected returns for the individual stocks in Ian's portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year. • The expected rate of return on Blue Llama Mining's stock over the next year is • The expected rate of return on Hungry Whale Electronics's stock over the next year is • The expected rate of return on Ian's portfolio over the next year is
joy is a financial investor who actively buys and sells in the securities market. Now she has a portfolio of all blue chips, including: $13,500 of Share A, $7,600 of Share B, $14,700 of Share C, and $5,500 of Share D. Required: If joy’s portfolio has provided her with returns of 9.7%, 12.4%, -5.5% and 17.2% over the past four years, respectively. Calculate the geometric average return of the portfolio for this period.
Cheyenne holds a $10,000 portfolio that consists of four stocks. Her Investment in each stock, as well as each stock's beta, is listed in the following table: Stock Investment Beta Standard Deviation Omni Consumer Products Co. (OCP) Zaxatti Enterprises (ZE) $3,500 1.00 18.00% $2,000 1.50 11.50% Western Gas & Electric Co. (WGC) Filtcom Corp. (FC) $1,500 1.15 20.00% $3,000 0.60 22.50% Suppose all stocks in Cheyenne's portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? O Filtcom Corp. O Western Gas & Electric Co. Omni Consumer Products Co. O Zaxatti Enterprises Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk? O Zaxatti Enterprises ○ Western Gas & Electric Co. Omni Consumer Products Co. Filtcom Corp. If the risk-free rate is 4% and the market risk premium is 5.5%, what is Cheyenne's portfolio's beta and required return? Fill in the following table:…
Rachel is a financial investor who actively buys and sells in the securities market. Now she has aportfolio of all blue chips, including: $13,500 of Share A, $7,600 of Share B, $14,700 of Share C, and$5,500 of Share D.Required:a) Compute the weights of the assets in Rachel’s portfolio? (2 marks)b) If Rachel’s portfolio has provided her with returns of 9.7%, 12.4%, -5.5% and 17.2% over the pastfour years, respectively. Calculate the geometric average return of the portfolio for this period. (2marks)c) Assume that expected return of the stock A in Rachel’s portfolio is 13.6% this year. The riskpremium on the stocks of the same industry are 4.8%, betas of these stocks is 1.5 and the inflationrate was 2.7%. Calculate the risk-free rate of return using Capital Market Asset Pricing Model(CAPM). (2 marks)d) Following is forecast for economic situation and Rachel’s portfolio returns next year, calculate theexpected return, variance and standard deviation of the portfolio. (4 marks)State of…
Elle holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock’s beta, is listed in the following table: Stock Investment Beta Standard Deviation Omni Consumer Products Co. (OCP) $3,500 0.80 9.00% Kulatsu Motors Co. (KMC) $2,000 1.90 11.00% Western Gas & Electric Co. (WGC) $1,500 1.10 16.00% Makissi Corp. (MC) $3,000 0.30 28.50% Suppose all stocks in Elle’s portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? Kulatsu Motors Co. Omni Consumer Products Co. Western Gas & Electric Co. Makissi Corp. Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk? Makissi Corp. Omni Consumer Products Co. Kulatsu Motors Co. Western Gas & Electric Co. If the risk-free rate is 7% and the market risk premium is 8.5%,…
Ariel holds a $5,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock’s beta, is listed in the following table: Stock Investment Beta Standard Deviation Perpetualcold Refrigeration Co. (PRC) $1,750 1.00 15.00% Tobotics Inc. (TI) $1,000 1.50 11.00% Three Waters Co. (TWC) $750 1.10 20.00% Mainway Toys Co. (MTC) $1,500 0.50 22.50% Suppose all stocks in Ariel’s portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? Mainway Toys Co. Tobotics Inc. Three Waters Co. Perpetualcold Refrigeration Co. Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk? Perpetualcold Refrigeration Co. Tobotics Inc. Three Waters Co. Mainway Toys Co. If the risk-free rate is 7% and the market risk premium is 8.5%, what is Ariel’s portfolio’s beta and required return? Fill in…

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