Consider the following information: State of Probability of Economy State of Economy Boon Good Poor Bust .17 .43 .33 .07 Stock A a. Expected return b. Variance c. Standard deviation .352 122 0.00120 .012 -.112 Rate of Return if State Occurs Stock B Answer is complete but not entirely correct. 11.70% 3.40 % a. Your portfolio is invested 32 percent each in A and C and 36 percent in B. What is the expected return of the portfolio? 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 this portfolio? .452 .102 .022 -.252 Note: Do not round Intermediate calculations and round your answer to 5 decimal places, e.g., .16161. c. What is the standard deviation of this portfolio? Note: Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Stock C .332 .172 -.052 -.092

Consider the following information: State of Probability of Economy State of Economy Boon Good Poor Bust .17 .43 .33 .07 Stock A a. Expected return b. Variance c. Standard deviation .352 122 0.00120 .012 -.112 Rate of Return if State Occurs Stock B Answer is complete but not entirely correct. 11.70% 3.40 % a. Your portfolio is invested 32 percent each in A and C and 36 percent in B. What is the expected return of the portfolio? 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 this portfolio? .452 .102 .022 -.252 Note: Do not round Intermediate calculations and round your answer to 5 decimal places, e.g., .16161. c. What is the standard deviation of this portfolio? Note: Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Stock C .332 .172 -.052 -.092

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: 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
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% *
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
Consider the following information about three stocks: Probability 0.22 State of Economy Boom Normal Bust 0.53 0.25 Stock A 0.24 0.00 0.17 -0.28 Stock B 0.36 0.13 -0.45 Stock C 0.55 0.09 Instructions: a) If your portfolio is invested 40% each in A and B and 20% in C, what is the portfolio expected return? The variance? The standard deviation? b) If the expected T-bill rate is 3.80%, the expected inflation rate is 3.50% what are the approximate and exact expected real returns on the portfolio? what is the approximate real risk premium? Show your steps.
2. Consider the following expected returns, volatilities, and correlations: Expected Standard Stock Return Deviation Correlation with Vital Correlation with Mital Correlation with Pital Vital 14% 6% 1.0 -1.0 0.0 Mital 44% 24% -1.0 1.0 0.7 Pital 23% 14% 0.0 0.7 1.0 a. Imagine a portfolio comprising solely of Vital and Mital. What portion of should be allocated to Vital stock to ensure a risk-free investment? your investment b. What is the portfolio's volatility when holding a $10,000 long position in Pital and a $2000 short position in Mital? wwwww c. In a market, there are two securities, Artis and Brotis. Currently, the price of Artis stands at £50. Looking ahead, the price of Artis next year will be £40 during a recession, £55 in normal economic times, and £60 in an expanding economy. The probabilities associated with recession, normal times, and expansion are 0.1, 0.8, and 0.1, respectively. Artis does not pay dividends and has a correlation of 0.8 with the market. On the other…
Consider the following information on a portfolio of three stocks: Probability of State Stock A Rate of Economy of Return State of Economy Boom Normal Bust .25 .60 15 a. Expected return Variance Standard deviation b. Expected risk premium 0.10 % .04 .09 15 0.00993 Stock B 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? 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. 0.10 % % .33 . 13 . 14 b. If the expected T-bill rate is 3.4 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. Stock C Rate of Return .55 . 19 -.28
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 Occurs Probability of State State of Economy of Economy Stock A Stock B Stock C Boom .10 34 44 24 Good .60 .19 15 08 Poor .25 -.01 09 -.07 Bust .05 -15 -.19 -11 a. Your portfolio is invested 25 percent each in A and C, and 50 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.) a. Expected return b-1. Variance % b-2. Standard deviation %
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

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