Consider the following information:State of EconomyBoomBustProbability of State of Economy.72.28Rate of Return if State OccursStock A.10.19Stock BStock C.04.30.25-.10a. 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 plab. 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.a. Expected returnb. Variance of portfolio%3

Given Information:Probabilities:Boom: 0.72Bust: 0.28Returns:Stock A: 0.10 (Boom), 0.19 (Bust)Stock…

Answered: Consider the following information:…

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: Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A Stock B Recession 21 .06 21 Normal 58 109 08 Boom 21 14 25 a. Calculate the expected return for Stocks A and B. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation for Stocks A and B. (Do not round Intermedlate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a. Stock A expected return a. Stock B expected return b. Stock A standard deviation b. Stock B standard deviation 196 96 96 %
Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A Stock B Stock C Boom .15 .35 .45 .27 Good .55 .16 .10 .08 Poor .25 -.01 -.06 -.04 Bust .05 -.12 -.20 -.09 a) Your portfolio is invested 40 percent each in A and C, and 20 percent in B. What is the expected return of the portfolio? b) What is the variance of this portfolio? The standard deviation? Stock C .45 .27 .10 .08 -.06 -.04 -.20 -.09
Consider the following information: State of Economy Boom Good Poor Bust Probability of State- of Economy 15 .55 a. Expected return b-1. Variance b-2. Standard deviation 25 .05 Rate of Return if State Occurs Stock A Stock B Stock C .33 .43 .23 .18 14 .12 -.05 -.13 a. Your portfolio is invested 26 percent each in A and C, and 48 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations and enter 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 and round your answer to 5 decimal places, e.g., .16161.) b-2. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % -.08 -.18 % -.06 -.10
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 .36 -.16 % 11 .25 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, 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. .05 .31
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We know the following expected returns for stocks A and B, given the different states of the economy: State(s) Probability E(rA,s) E(rB,s) Recession 0.1-0.06 0.04 Normal 0.5 0.09 0.07 Expansion 0.4 0.17 0.11 What is the standard deviation of returns for stock B?
Consider the following information: State of Probability of Economy State of Economy Boom Bust .58 .42 Rate of Return if State Occurs Variance Stock A .07 .16 Stock B 15 .06 a. 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.) Expected return 12.87% % Stock C 33 -.06 b. What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., 32.161616.) 1.29% *
es Consider the following information on three stocks: State of Economy Boom Normal Bust Probability of State of Economy .20 .40 .40 Rate of Return If State Occurs Stock A .34 .25 .03 Stock B .46 .23 -.25 Stock C .50 .20 - .42 a-1. If your portfolio is invested 35 percent each in A and B and 30 percent in C, what is the portfolio expected return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .32161.) a-3. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the expected T-bill rate is 4.50 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations abd enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. If the expected inflation rate…
Consider the following information on Stocks I and II: Probability of State of Economy State of Economy Rate of Return if State Occurs Stock I Stock II Recession .22 .045 -.37 Normal .62 .355 .29 Irrational .16 exuberance .215 .47 The market risk premium is 11.7 percent, and the risk-free rate is 4.7 percent. a. Calculate the beta and standard deviation of Stock I. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. b. Calculate the beta and standard deviation of Stock II. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is "riskier"? a. Beta Standard deviation b. Beta Standard deviation c. Most systematic risk d. Most unsystematic risk e. "Riskier" stock 1.94 % %
Vijay
Consider the following information: State of Probability of Economy State of Economy Boom Bust 0.62 0.38 Rate of Return if State Occurs Stock A 0.09 0.20 Stock B 0.17 0.06 Stock C 0.35 -0.10 6 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Expected return % b. What is the variance of a portfolio invested 20% each in A and B and 60% in C? (Do not round intermediate calculations. Roun the final answer to 6 decimal places.) Variance
Consider the following information: Rate of Return If State Occurs State of Probability of State of Economy Economy Boom .60 Stock A .08 Stock B .16 Stock C .34 Bust .40 .18 .08 -.07 a. 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.) b. What is the variance of a portfolio invested 18 percent each in A and B and 64 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.) a. Expected return % b. Variance

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