Consider the following information:State ofEconomy Probability of State of Economy Rate of Return if State OccursStock A Stock B Stock CBoom 0.58 0.08 0.17 0.37Bust 0.42 0.11 0.04 -0.06a. 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. Round the final answer to 6 decimal places.)Variance =

Part (a): Expected Return on an Equally Weighted PortfolioGiven Information:States of Economy:Boom:…

Answered: Consider the following information:…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 6P: The market and Stock J have the following probability distributions: a. Calculate the expected rates...

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Similar questions

The market and Stock J have the following probability distributions: a. Calculate the expected rates of return for the market and Stock J. b. Calculate the standard deviations for the market and Stock J.
Calculate the correlation coefficient between Blandy and the market. Use this and the previously calculated (or given) standard deviations of Blandy and the market to estimate Blandy’s beta. Does Blandy contribute more or less risk to a well-diversified portfolio than does the average stock? Use the SML to estimate Blandy’s required return.
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: State of Economy Boom Bust Probability of State of Economy a. Expected return b. Variance .60 .40 Rate of Return if State Occurs % Stock A Stock B .23 .08 .15 .18 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 24 percent each in A and B and 52 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.) Stock C .42 -.09
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 %
Suppose the index model for stocks A and B is estimated with the following results:rA = 2% + 0.8RM + eA, rB = 2% + 1.2RM + eB , σM = 20%, and RM = rM − rf . The regressionR2 of stocks A and B is 0.40 and 0.30, respectively.(a) What is the variance of each stock? (b) What is the firm-specific risk of each stock? (c) What is the covariance between the two stocks?
Consider the following Information: Rate of Return If State Occurs State of Economy Probability of State of Economy Boom .58 Stock A .08 Stock B .17 Stock C .37 Bust .42 14 .06 -.04 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 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., .161616.) a. Expected return b. Variance %
Consider the following information: State of Economy Probability of State of Economy Boom Bust Rate of Return if State Occurs Stock A Stock B Stock C .67 .33 .10 .24 .04 .35 .30 -.15 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 22 percent each in A and B and 56 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. Answer is complete but not entirely correct. a. Expected return b. Variance of portfolio 11.90% 0.01247 X
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 Boom Bust Economy 0.55 8.45 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate Round the final answer to 2 decimal places.) Expected return Variance Rate of Return if State Occurs Stock A Stock B Stock C 0.06 0.14 0.34 0.10 0.02 -0.07 10.65% 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.)
Consider the following information: Rate of Return If State Ocurs State of Probability of State of Economy .56 Economy Stock A Stock B Stock C Boom .06 .14 34 Bust .44 15 .05 -.04 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 22 percent each in A and B and 56 percent in C? (Do not round Intermedlate calculations and round your answer to 6 decimal places, e.g., 161616.) a. Expected return % b. Variance < Prev 16 of 30 Next 8A1B4474-4751,.jpeg 8A1B4474-4751.jpeg EA9F9D41-D35...jpeg 000 F7 F8 20 F3 D00 F4 F5 F2
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

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