calculation in Eq. 11.9.d. Explain why the portfolio has a lower volatility than the average volatility of the two stocks.a. What is theEnter the returYearPortfoliob. Based on yThe average rThe volatility oc. Show that (calculation in EData tableYearStock AStock B(Click on the following icon in order to copy its contents into a spreadsheet.)2010- 1%12%20116%32%Print20126%3%2013- 3%- 3%—Donereturns of the two stocks, and (ii) the volatility of th20144%- 4%The average aThe average annual return for stock B is%. (Round to two decimal places.)The (weighted) average of the average returns of the two stocks is%. (Round to two decimal places.)201514%22%volatility of the Using the data in the following table, consider a portfolio that maintains a 60% weight on stock A and a 40% weight on stock B.a. What is the return each year of this portfolio?b. Based on your results from part (a), compute the average return and volatility of the portfolio.c. Show that (i) the average return of the portfolio is equal to the (weighted) average of the average returns of the two stocks, and (ii) the volatility of the portfolio equals the same result as from thecalculation in Eq. 11.9.d. Explain why the portfolio has a lower volatility than the average volatility of the two stocks.a. What is the return each year of this portfolio?Enter the return of this portfolio for each year in the table below: (Round to two decimal places.)Year2012Portfolio%2010%2011%b. Based on your results from part (a), compute the average return and volatility of the portfolio.The average return of the portfolio is%. (Round to two decimal places.)2013%2014%2015%The volatility of the portfolio is%. (Round to two decimal places.)c. Show that (i) the average return of the portfolio is equal to the (weighted) average of the average returns of the two stocks, and (ii) the volatility of the portfolio equals the same result as from thecalculation in Eq. 11.9.The average annual return for stock A is%. (Round to two decimal places.)The average annual return for stock B is%. (Round to two decimal places.)The (weighted) average of the average returns of the two stocks is %. (Round to two decimal places.)

A Portfolio is combination of different tradable securities. Creating portfolio reduces…

d. Explain why the portfolio has a lower volatility than the average volatility of the two stocks. a. What is the Enter the retur Year Portfolio b. Based on y The average r The volatility o c. Show that ( calculation in E The average a Data table (Click on the following icon in order to copy its contents into a spreadsheet.) 2011 6% 32% Year Stock A Stock B 2010 - 1% 12% Print 2012 6% 3% 2013 - 3% - 3% Done 2014 4% - 4% 2015 14% 22% - X volatility of the

d. Explain why the portfolio has a lower volatility than the average volatility of the two stocks. a. What is the Enter the retur Year Portfolio b. Based on y The average r The volatility o c. Show that ( calculation in E The average a Data table (Click on the following icon in order to copy its contents into a spreadsheet.) 2011 6% 32% Year Stock A Stock B 2010 - 1% 12% Print 2012 6% 3% 2013 - 3% - 3% Done 2014 4% - 4% 2015 14% 22% - X volatility of the

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

Historical Returns: Expected and Required Rates of Return You have observed the following returns over time: Assume that the risk-free rate is 5% and the market risk premium is 4%. a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. % Year 2017 2018 2019 2020 2021 % Stock X 12% 17 -13 2 22 % Stock Y 15% 7 -4 3 12 Stock X: Stock Y: b. What are the required rates of return on Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places. Market 13% 12 -10 2 15
Using the data in the following table, calculate the volatility (standard deviation) of a portfolio that is 60% invested in stock A and 40% in stock B. The volatility of the portfolio is %. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year Stock A Stock B 2010 2011 2012 2013 2014 2015 -10% 19% 4% -3% 5% 12% 19% 39% 24% -8% -8% 35% Print Done Х
Intro We know the following expected returns for stocks A and B, given different states of the economy: State (s) Probability E(rA.s) E(rB,s) -0.1 0.04 0.08 0.05 0.13 0.07 Recession 0.2 Normal 0.5 Expansion 0.3 Part 1 What is the expected return for stock A? 3+ decimals Submit
Consider the rate of return of stocks ABC and XYZ. Year 1 2 3 4 ABC XYZ ABC 22% 9 19 1 O ABC Ⓒ XYZ ABC XYZ Required: a. Calculate the arithmetic average return on these stocks over the sample period. (Do not round Intermediate calculations. Round your answers to 2 decimal places.) XYZ 38% 11 19 -11 Arithmetic Average b. Which stock has greater dispersion around the mean return? c. Calculate the geometric average returns of each stock. (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Expected rate of return 11.40 % 11.40 % Geometric Average Expected rate of return d. If you were equally likely to earn a return of 22%, 9%, 19%, 6%, or 1%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) e. What if the five possible outcomes were those of stock XYZ? (Do not round Intermediate calculations. Round your answers to 2…
Am. 340.
1. 1- Calculate the beta adjusted by the degree of freedom for stock X relative to the equity market using the information from the table (performance): A B 0.82 1.22 42.07 Year 1 2 3 4 5 6 7 None of the options is true X -7 -11 21 15 8 9 -2 Market 7 15 20 17 10 7 -1
Accounting Use the following information: Stock A B Good state 12% 17% Bad state 0% -1% Assume there is 60% probability that the good state occurs and 40% chance the bad state occurs. What is the expected return of a portfolio that is 9% invested in stock A and 1-9% invested in B? (Please use 5 decimal places, this should be written in percentage return, so an answer of 23.143% should be written at .23143)
Using the data in the following table, and the fact that the correlation of A and B is 0.48, calculate the volatility (standard deviation) of a portfolio that is 70% invested in stock A and 30% invested in stock B. (Click on the following icon in order to copy its contents into a spreadsheet.) Year 2008 2009 2010 2011 2012 2013 Realized Returns Stock A - 10% 20% 5% - 5% 2% 9% Stock B 21% 30% 7% - 3% - 8% 25% The standard deviation of the portfolio is %. (Round to two decimal places.)
Q4: Assume the following information for stocks A and B. • Expected return on Stock A = 18%. • Expected return on Stock B = 23%. • Correlation between returns of Stock A and Stock B = 0.10. • Standard deviation of returns on Stock A = 40%. • Standard deviation of returns on Stock B = 50%. Compute The expected return Standard deviation
Q2 - Returns on stocks X and Y are listed below: Period 1 2 3 4 5 6 7Stock X 4% -2% 5% -1% 10% 7% 12%Stock Y -3% 7% 4% 2% 2% 8% -3% Consider a portfolio of 10% stock X and 90% stock Y. What is the mean of portfolio returns? Please specify your answer in decimal terms and round your answer to the nearest thousandth (e.g., enter 12.3 percent as 0.123).
Assume these are the stock market and Treasury bill returns for a 5-year period: Year 2016 2017 2018 2019 2020 Stock Market Return (%) 33.30 13.20 -3.50 14.50 23.80 Required: a. What was the risk premium on common stock in each year? b. What was the average risk premium? c. What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) 3 Required A Required B T-Bill Return Complete this question by entering your answers in the tabs below. Standard deviation (%) 0.12 0.12 0.12 0.07 0.09 x Answer is complete but not entirely correct. Required C What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. 13.69 X % घ

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