Consider the following information on a portfolio of three stocks:State of Probability of State Stock A Rate ofEconomyof EconomyReturn.02Boom15Normal55Bust3016a. Expected returnVarianceStandard deviationb. Expected risk premiumStock B Rate ofReturn%32%%-.11a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance,and the standard deviation?Stock C Rate ofReturnNote: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., .16161. Enter your otheranswers as a percent rounded to 2 decimal places, e.g., 32.16.b. If the expected T-bill rate is 3.75 percent, what is the expected risk premium on the portfolio?Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16..6020-.35

Optimal portfolio consists of the combination of the debt and equity component for generating funds…

Consider the following information on a portfolio of three stocks: State of Probability of State Stock A Rate of Economy of Economy Return Boom .15 .02 Normal .55 Bust .30 .10 .16 a. Expected return Variance Stock B Rate of Return .32 .12 -.11 % Stock C Rate of Return a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance and the standard deviation? .60 .20 -.35 Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., .16161. Enter your othe answers as a percent rounded to 2 decimal places, e.g., 32.16. b. If the expected T-bill rate is 3.75 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

Consider the following information on a portfolio of three stocks: State of Probability of State Stock A Rate of Economy of Economy Return Boom .15 .02 Normal .55 Bust .30 .10 .16 a. Expected return Variance Stock B Rate of Return .32 .12 -.11 % Stock C Rate of Return a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance and the standard deviation? .60 .20 -.35 Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., .16161. Enter your othe answers as a percent rounded to 2 decimal places, e.g., 32.16. b. If the expected T-bill rate is 3.75 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

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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Consider the following information on a portfolio of three stocks: State of Probability of Economy State of Economy Boom .12 Normal Bust .33 Stock A Rate of Return .07 .16 Stock B Rate of Return .32 .27 -.26 Stock Rate of Return .45 .25 -.35 a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance, and the standard deviation ? Note: Do not round intermediate calculations . Round your variance answer to 5 decimal places, e.g., .16161. Enter your other answers as a percent rounded to 2 decimal places , e.g., 32.16. bIf the expected T-bill rate is 4.5 percent, what is the expected risk premium on the portfolio ? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16 . % a. Expected return Variance Standard deviation % b. Expected risk premium %
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
Consider the following information: State of Economy Probability of State of Economy Boom Bust .68 :32 a. Expected return b. Variance of portfolio Rate of Return if State Occurs Stock A Stock B Stock C .11. .15 .05 .21 .26 -.06 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the variance of a portfolio invested 23 percent each in A and B and 54 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.
Consider the following information: State of Economy Probability of State of Economy Boom Bust .72 .28 a. Expected return b. Variance of portfolio Rate of Return if State Occurs Stock A Stock B .04 .25 13.73 % .10 .19 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the variance of a portfolio invested 27 percent each in A and B and 46 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. Stock C .30 -.10
XYZ stock's returns will have the following probability distribution during the possible states of the economy.a. Calculate the expected return on XYZ stock.b. Calculate the standard devivation of XYZ stock returns.c. Calculate the coefficient of variation of XYZ stock.State of Economy Probability Return Boom 15% 22.75% Normal 70% 12.60% Recession 15% -15.20% Expected Return: % Standard Deviation: Coefficient of Variation:
Consider the following information for four portfolios, the market, and the risk-free rate (RFR): Portfolio Return Beta SD A1 0.15 1.25 0.182 A2 0.1 0.9 0.223 A3 0.12 1.1 0.138 A4 0.08 0.8 0.125 Market 0.11 1 0.2 RFR 0.03 0 0 Refer to Exhibit 18.6. Calculate the Jensen alpha Measure for each portfolio. a. A1 = 0.014, A2 = -0.002, A3 = 0.002, A4 = -0.02 b. A1 = 0.002, A2 = -0.02, A3 = 0.002, A4 = -0.014 c. A1 = 0.02, A2 = -0.002, A3 = 0.002, A4 = -0.014 d. A1 = 0.03, A2 = -0.002, A3 = 0.02, A4 = -0.14 e. A1 = 0.02, A2 = -0.002, A3 = 0.02, A4 = -0.14
Consider two stocks, X and Y Expected return (%) Standard deviation (%) Stock X 10 % 18 % Stock Y 25 % 24 % The returns on the stocks are perfectly negatively correlated. What is the expected return of a portfolio comprising of stocks X and Y when the portfolio is constructed to drive the standard deviation of portfolio return to zero?
Consider the following information on a portfolio of three stocks: State of Economy Probability of State of Economy Stock A Rate of Return Stock B Rate of Return Stock C Rate of Return Boom.13.02.32.50 Normal.55.10.22.20 Bust .32.16.21.35 If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance, and the standard deviation? Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., 16161. Enter your other answers as a percent rounded to 2 decimal places, e. g., 32.16. If the expected T-bill rate is 4.25 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.
Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Boom Bust .66 .34 Stock A .09 .23 Stock B .03 Stock C .34 .29 -.14 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the variance of a portfolio invested 21 percent each in A and B and 58 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. a. Expected return b. Variance of portfolio 14.43 %
Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock C Boom .14 Bust .16 a. b. Stock B .58 .42 .22.40 .06-.05 What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the variance of a portfolio invested 22 percent each in A and B and 56 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.)
Consider the following information: Probability of State of State of Economy Book Bust Economy 0.55 Variance Rate of Return if State Occurs Stock A Stock B 0.06 0.14 0.10 0.02 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediat Round the final answer to 2 decimal places.) Expected return b. What is the variance of a portfolio invested 25% each in A and B and 50% in C? (Do not round intermediate calc the final answer to 6 decimal places.) 10.65% Stock C 0.34 -0.07
The following portfolios are being considered for investment. During the period under consideration, RFR = 0.07. Portfolio Return Beta P 0.15 1.00 0.05 Q 0.09 0.50 0.03 R. 0.21 1.30 0.10 0.18 1.20 0.06 Market 0.12 1.00 0.04 a. Compute the Sharpe measure for each portfolio and the market portfolio. Round your answers to three decimal places. Portfolio Sharpe measure P Q R Market b. Compute the Treynor measure for each portfolio and the market portfolio. Round your answers to three decimal places. Portfolio Treynor measure P Q R Market c. Rank the portfolios using each measure, explaining the cause for any differences you find in the rankings. Portfolio Rank (Sharpe measure) Rank (Treynor measure) P |-Select- v |-Select- v Q -Select- v -Select- V R. -Select- V -Select- v -Select- v -Select- v Market -Select- v -Select- v -Select- v is poorly diversified since it has a high ranking based on the -Select- but a much lower ranking with the -Select-

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