Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Mean return Variance Probability 0.05 0.25 0.40 0.30 % Stock Fund Rate of Return -26% -6% 11% 16% Bond Fund Rate of Return Required: a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 2 decimal places.) -11% 17% 10% -7%

Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Mean return Variance Probability 0.05 0.25 0.40 0.30 % Stock Fund Rate of Return -26% -6% 11% 16% Bond Fund Rate of Return Required: a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 2 decimal places.) -11% 17% 10% -7%

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

See similar textbooks

Similar questions

Consider the following table: Scenario Probability Stock FundRate of Return Bond FundRate of Return Severe recession 0.10 −41% −14% Mild recession 0.20 −21% 20% Normal growth 0.40 26% 13% Boom 0.30 31% −10% Required: a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 2 decimal places.) b. Calculate the value of the covariance between the stock and bond funds. (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)
Consider the following table: Scenario Probability Stock FundRate of Return Bond FundRate of Return Severe recession 0.10 −43% −12% Mild recession 0.20 −17.0% 12% Normal growth 0.30 17% 6% Boom 0.40 31% 4% Required: a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 4 decimal places.) b. Calculate the value of the covariance between the stock and bond funds
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.)
О SB Fund has run the Carhart multi-factor regression on the expected return of its portfolio A. Based on the following factor loadings what types of stocks is portfolio A most likely holding? Risk premium ВА ад Alpha Market SMB HML Momentum 8.0% 3.5% 4.0% 2.1% 0.9 1.7 -0.6 -0.5 1.2% a. small stocks, growth stocks, and stocks with poor past performance b. large stocks, growth stocks, and stocks with poor past performance C. small stocks, growth stocks, and stocks with good past performance d. large stocks, value stocks, and stocks with good past performance e. small stocks, value stocks, and stocks with poor past performance
8. A portfolio consists of bonds, stocks, commodities and real estates. The portfolio weightings, expected returns, variances and correlation matrix are shown below. Bonds Stocks Commodities Real Estate Correlation Matrix Bonds Stocks Commodities Real Estate Weight 50% 10% 15% 25% Bonds 1.0 Stocks -0.2 1.0 Expected Return 8% 12% 20% 16% Commodities 0.1 0.4 1.0 Variance (%²) 10 30 15 20 Real Estate 0.3 0.6 0.2 1.0 a. Calculate the expected return and the standard deviation of the return of the portfolio.
8. A portfolio consists of bonds, stocks, commodities and real estates. The portfolio weightings, expected returns, variances and correlation matrix are shown below. Weight Expected Return Variance (%2) Bonds 50% 10% 15% 25% 8% 12% 20% 16% 10 30 15 20 0.1 0.3 0.4 0.6 1.0 0.2 1.0 Stocks Commodities Real Estate Correlation Matrix Bonds 1.0 -0.2 1.0 Stocks Commodities Real Estate Bonds Stocks Commodities Real Estate Calculate the standard deviation of the return of the portfolio.
Problem 6-6 (Algo) Consider the following table: Scenario Probability Stock Fund Rate of Return Bond Fund Rate of Return Severe recession 0.10 -44% -11% Mild recession 0.20 -24% 17% Normal growth 0.40 29% 10% Boom 0.30 34% -7% Required: a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 2 decimal places.) b. Calculate the value of the covariance between the stock and bond funds. (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)
None
Consider the following portfolio of assets: Loan Weight 1 0.30 2 0.70 Expected returni ம σ2 13% 11% 9.06% 82.0% P12=-0.87 8.72% 76.0% 012-75.0% What is the variance of the portfolio (round to two decimals)? Note: a^2 denotes the square of a. For example, 2^2 = 4, 3^2=9 (0.3)^2*(82.0%) + (0.7)^2*(76.0%) + (0.3) (0.7)(-0.87) (9.06%) (8.72%) = 30.19 (0.3)^2 (82.0%) + (0.7)^2*(76.0%) + 2(0.3) (0.7)(-0.87) (9.06 %) (8.72%) = 15.75 (0.3)^2*(82.0%) + (0.7)^2*(76.0%) + [(0.3) (0.7)]^2 (-0.87) (9.06%) (8.72%) = 41.59 (0.3) (82.0%) + (0.7) (76.0%) + 2(0.3) (0.7)(-0.87) (9.06 %) (8.72%) = 48.93
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.)
Fund A Fund B Expected Ret. E(r) 13.2% 8.3% Standard Deviation - \sigma 15.5% 14.7% The table above contains expected annual returns for funds A and B. Assuming that the risk free rate is 1.34% and that the correlation of returns between funds A and B is 0.32, calculate the weight of Fund A in the Optimal two - risky asset portfolio comprised of funds A and B. Note: Enter your answer in percentages rounded to the nearest one digit after the decimal point. For example, if the weight of Fund A is 15.437% or 0.15437, enter it as: 15.4
Question 11: You regress the monthly returns of XYZ fund for the past five years against three factors (i.e. Market factor = 1.2, SMB factor = −0.3, HML factor = 1.4)). What do these coefficient values mean and what type of stocks does the fund probably hold?

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS