Bhupatbhai Consider the following information:Rate of Return if State OccursProbability of State-State of Economyof EconomyStock AStock BStock CBoom.15.33.43.34Good.50.20.14.08Poor.30-.01-.09-.03Bust.05-.17-.29-10a. Your portfolio is invested 32 percent each in A and C, and 36 percent in B. What isthe expected return of the portfolio? (Do not round intermediate calculations andenter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)b-1. What is the variance of this portfolio? (Do not round intermediate calculations andround your answer to 5 decimal places, e.g., .16161.)b-2. What is the standard deviation? (Do not round intermediate calculations and enteryour answer as a percent rounded to 2 decimal places, e.g., 32.16.)%a. Expected returnb-1. Varianceb-2. Standard deviation%

Expected Return:E(R_p) = sum (P_i . (w_A . R_A,i + w_B . R_B,i + w_C . R_C,i))Where:- ( P_i ) is the…

Answered: Consider the following information:…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 13MC: Which of the following discounts future cash flows to their present value at the expected rate of...

See similar textbooks

Similar questions

Portfolio Management A particular firm’s portfolio is composed of two assets, which we will call" A" and "B." Let X denote the annual rate of return from asset A, and let Y denote the annual rate of return from asset B. Suppose that E(X) = 0.15, E(Y) = 0.20, SD (X) = 0.05, SD (Y) = 0.06, and CORR (X, Y) = 0.30. (a) What is the expected return of investing 50% of the portfolio in asset A and 50% of the portfolio in asset B? What is the variance of this return? (b) Replace CORR (X, Y) = 0.30 by CORR (X, Y) = 0.60, 0, -0.30, and -0.60 and answer the questions in part (a). What is the impact of correlation on the expected returns and its variance? Explain why this is so. (c) Suppose that the fraction of the portfolio that is invested in asset B is f, and so the fraction of the portfolio that is invested in asset A is (1 – f). Let f vary from f = 0.0 to f = 1.0 in increments of 5% (that is, f = 0.0, 0.05, 0.10, 0.15, ...), and compute the mean and the variance of the annual rate of…
State ofEconomy Probabilityof State Return on AssetDin State Return on AssetEin State Return on AssetFin State Boom 0.35 0.060 0.310 0.25 Normal 0.50 0.060 0.180 0.20 Recession 0.15 0.060 -0.210 0.10 An investor builds up his portfolio with 40% in Asset D, and the rest isAsset F. What is his expected portfolio returns?
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Asset (A) Asset (B) E(RA)=10% E(RB) = 15% (σA)=8% (GB) = 9.5% WA = 0.25 WB = 0.75 COVA.B = 0.006 What is the standard deviation of this portfolio? O 13.75% O 8.79% O 12.5% O 7.72%
Consider the information for assets A, B, and C below: Probability Return on A 0.2 0.4 0.4 State Boom Average Bust 0.3 0.2 0.1 Return on B Return on C 0.05 9.15 0.2 0.1 0.25 0.3 Consider Portfolio (Y) comprising 60% Asset A and 40% Asset C. What is the variance of portfolio Y™?
The following portfolios are being considered for investment. During the period under consideration, RFR =0.07 Porfolio Return Beta P 0.15 1.00 0.05 Q 0.20 1.50 0.1 R 0.10 0.60 0.03 S 0.17 1.10 0.06 Market 0.13 1.00 0.04 Compute the Sharpe measure for each portfolio and the market portfolio Compute the Treynor measure for each portfolio and the market portfolio Rank the portfolios using each measure explaining the cause for any differences you find in the rankings.
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
Portfolio theory with two assets E(R1)=0.15 E(01)= 0.10 W1=0.5 E(R2)=0.20 E(02) = 0.20 W2=0.5 Calculate the expected return and the standard deviation of the two portfolios if r1,2 = 0.4 and -0.60 respectively.
Suppose that a two-factor model, where the factors are the market return (Factor 1) and the growth rate of industrial production (Factor 2), correctly describes the return generating processes of all assets and the corresponding two-factor APT correctly prices three well- diversified portfolios, A, B, and C. Expected Return Portfolio A BC с 15% 20% 6% Sensitivity to Factor 1 1 1 0 Sensitivity to Factor 2 0 1 0 a. What are i) the risk premiums of the two factors and ii) the risk-free rate? b. Another well-diversified portfolio D has sensitivities 0 and 1 to factor 1 and factor 2, respectively. What is the APT-consistent expected return on Portfolio D? c. Suppose that Portfolio D's expected return is 10%. Given your answers above, form a portfolio consisting of Portfolios A, B, C, and D that generates an arbitrage profit. Express the other portfolio weights by using that of D as the numeraire- 1 or -1. Show your workings.
Using the table below, calculate the Standard Deviation of the portfolio: Demand for Company Products Probability of this Demand Occurring Rate of Return if this demand Occurs (k) Weak 0.15 -30% Below average 0.25 -15% Average 0.25 10% Above Average 0.20 25% Strong 0.15 45%
Consider the following performance data for a portfolio manager: Benchmark Portfolio Index Portfolio Weight Weight Return Return Stocks 0.65 0.7 0.11 0.12 Bonds 0.3 0.25 0.07 0.08 Cash 0.05 0.05 0.03 0.025 a.Calculate the percentage return that can be attributed to the asset allocation decision. b.Calculate the percentage return that can be attributed to the security selection decision.
Consider the following information: Probability State of of State of Economy Boom Good Foor Bust Economy 0.20 0.25 0.10 0.45 Variance Rate of Return if State Occurs Stock A 0.19 0.16 0.00 -0.00 Stock B 0.38 0.23 -0.09 -0.32 Standard deviation Stock C 0.28 0.10 a. Your portfolio is invested 25 percent each in Stocks A and C and 50 percent in Stock B. What is the expected return of the portfolio? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Expected return -0.05 -0.10 b-1. What is the variance of this portfolio? Note: Do not round intermediate calculations. Round your answer to 5 decimal places. b-2. What is the standard deviation? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
I need this question answer general Accounting

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

SEE MORE TEXTBOOKS