Consider the following scenario analysis: Scenario Recession Normal economy Boom Rate of Return Probability 0.2 Stocks Bonds -7% 15% 0.7 16 7 0.1 25 6 Assume a portfolio with weights of 0.60 in stocks and 0.40 in bonds. a. What is the rate of return on the portfolio in each scenario? b. What are the expected rate of return and standard deviation of the portfolio? Complete this question by entering your answers in the tabs below. Required A Required B What is the rate of return on the portfolio in each scenario? Note: Enter your answer as a percent rounded to 1 decimal place.

Consider the following scenario analysis: Scenario Recession Normal economy Boom Rate of Return Probability 0.2 Stocks Bonds -7% 15% 0.7 16 7 0.1 25 6 Assume a portfolio with weights of 0.60 in stocks and 0.40 in bonds. a. What is the rate of return on the portfolio in each scenario? b. What are the expected rate of return and standard deviation of the portfolio? Complete this question by entering your answers in the tabs below. Required A Required B What is the rate of return on the portfolio in each scenario? Note: Enter your answer as a percent rounded to 1 decimal place.

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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You are given the following information concerning three portfolios, the market portfolio, and the risk- free asset: Portfolio X Y Z Market Risk-free Rp 14.5% R-squared 13.5 9.1 10.7 5.4 op 36% 31 21 26 0 6p 1.60 1.30 .80 1.00 0 Assume that the correlation of returns on Portfolio Y to returns on the market is 72. What percentage of Portfolio Y's return is driven by the market? (Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places.)
. The following questions are related to modern portfolio theory. • Assume there are only two stocks in the equity market. •The risk-free rate is 1.00%. Stock Return Volatility Correlation Matrix Y 0.7 1.0 X Y X 15.00% 20.00% 1.0 10.00% 15.00% 0.7 (a) Make an investment portfolio using the risky assets that has an expected return 12%. (b) Calculate the volatility of the portfolio in (a).
Problem 1: You invest in a portfolio of 5 stocks with an equal investment in each one. The betas of the 5 stocks are as follows: .75, -1.2, .90, 1.3, 1.5. The risk free return is 4% and the market return is 9%. A. Compute the beta of the portfolio B. Compute the required return of the portfolio
Using CAPM to determine the expected rate of return for risky assets, consider the following example stocks, assuming that you have already compute the betas Stock Beta A 0.70 B 1.00 C 1.15 D 1.40 E -0.30 Assume that we expect the economy’s RFR to be 5 percent (0.05) and the expected return on the market portfolio (E(RM)) to be 9 percent (0.09), 1, what would this imply? With these inputs, what would the be the following required rate of returns for these five stocks, show the formula for each in your calculations.
Consider the following table which provides a comparison of the returns for a portfolio and its benchmark. Year 0 1 2 3 4 5 Return Alpha Sum Tracking Error Information Ratio Note: the numbers in red are negative b. Calculate the portfolio alpha in percentage terms c. Calculate the tracking error of the portfolio in percentage terms Portfolio Return 16% 9% -35% 22% 84% Required a. Calculate the annualised return of the portfolio and the benchmark in percentage terms d. Calculate the information ratio of the portfolio to 2 decimal places e. Determine to 2 decimal places the amount of Carhart alpha for the portfolio in percentage terms if: o the risk-free rate is 3.25%, o the return of the market is 9.20%, o the exposure to the value factor (when the premium is 3.15%) is 0.65 (ie 65%), o the exposure to the small cap factor (when the premium is 2.05%) is -0.12, and o the exposure to the momentum factor (when the premium is 46%) is 0.1. Benchmark Return 14% 7% -38% 18% 86%
Consider the following information about three stocks: State of Economy Probability of State of Economy Rate of Return If State Occurs Stock A Stock B Stock C Boom.25.13.29.60 Normal .60.08.11.13 Bust.15.02.18-.45 a-1. If your portfolio is invested 40 percent each in A and B and 20 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., .16161.) 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 3.70 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e .g., 32.16.) c-1. If the expected inflation rate is 3.30…
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM Investment Beta Analyst's Estimated Return Stock X 2.3 15.5% Stock Y 1.2 13.6% Market Portfolio 1.0 11.5% Risk-free rate 4.0% What is the required rate of return for Stock X based on the capital asset pricing model (CAPM)?
What is the shape of the yield curve given the term structure below? What expectations are investors likely to have about future interest rates? 5 yr 7 yr 10 yr 20 yr 1 yr 2 yr 3 yr Term 4.13 4.93 3.32 3.74 2.38 2.73 1.98 Rate (EAR %) ... What is the shape of the yield curve given the term structure below? (Select the best choice below.) A. The yield curve is an inverted yield curve (decreasing). B. It is hard to tell because we are not given an EAR for every year. C. The yield curve is a flat yield curve. D. The yield curve is a normal yield curve (increasing).
Consider the following information in Figure 1 below for a portfolio including security A and security B: Figure 1 State of the economy Probability of state of economy Return on A (%) Return on B (%) Boom 0.2 15 5 Growth 0.2 -5 0 Normal 0.5 10 10 Recession 0.1 5 20 If you want to include one more security C into the above portfolio. (e.g., a new portfolio including securities A, B, and C), what is the new portfolio variance if you invest 40% of C and 60% of the old portfolio including A and B (50% weights for A and B)? Assume the standard deviation of C is 10%, and correlation coefficient between the old portfolio and C is 0.8.
4. An investor anticipates the following forecasted returns in three scenarios for two stocks and the market index: Scenario Probability M A B Recession Stagnation Growth a. Compute the expected return and risk of A and B. 0.2 6% 10% 4% 0.5 10% 12% 8% 0.3 20% 24% 16% b. Compute the beta coefficients and the return at equilibrium given a risk-free rate of 5%. c. Compute the expected return and risk on a portfolio composed of A and B in proportions of 30% and 70%.
Suppose a portfolio is given as follows: Investment Name ABC Corn Mill X-Treme Manufacturing b.) 3.6% Ob.) none listed a.) none listed a.) 4.5% a.) 4% b.) 4% b.) 3.4% Weight a.) 5% 0.4 0.6 a.) What is the expected return of the portfolio? b.) What is the standard deviation of the portfolio if the correlation is +0.4? Select the most appropriate responses below for parts a.) and b.). Expected Return 2% 7% Standard Deviation 2% 5%
hi there, i need answer for a and b. thankssss

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