Given the information in the table below, what is the covariance between the return series of stock A and B. Round your answer! A B Year Past Returns Past Return 2017 20 16 2018 2 12 2019 -2 9 ER] 6.67 11.33 STD 11.72 3.51 W 50.00% 50.00% PAB 0.9638 None of the answers is correct 55.24 50.33 33.12 39.65
Q: What was the risk premium on common stock in each year? What was the average risk premium? What was…
A: Risk premium is the excess return over the risk free rate. This can be computed with the formula…
Q: You are considering two stocks and have determined the following information: Stock A The return on…
A: Solution: Given, Probability of Stock A (P) Return of Stock A(%) = RA E(RA) = RA*P [RA -…
Q: The risk-free rate is 4.15 percent. What is the expected risk premium on this stock given the…
A: Investors have different options to make investments, and the motive behind investments is to…
Q: You are given the following information: State of Economy Bear Normal Bull Return on Stock A 114 103…
A: State of economyProbabilityReturn on Stock AReturn on Stock…
Q: The market and Stock J have the following probability distributions: Probability rM rJ 0.3 14 % 18 %…
A: The expected return on a probability distribution is the sum product of probability with the…
Q: What is the CAPM required return for Stock Z, in decimal form? Round your answer to 4 decimal places…
A:
Q: E Consider the following information: Probability of Rate of Return if State Occurs Economy…
A: The expected return is the amount of return expected from the investment. Standard deviation is a…
Q: The following table is an analyst's best guess for the likelihood of various states of the economy…
A: Economy Probability (%) Ideal 0.2 20.0 Good 0.4 15.0 Fair 0.3 8.0…
Q: •What is the covariance of returns between stocks A and B? year Year Return A…
A: Covariance is the proportion by which two sets of investment returns oscillate in relation to each…
Q: The following three stocks are available in the market: E(R) В 10.4% 1.26 Stock A Stock B 13.6 1.06…
A: A market model gives a numerical representation of how market dynamics and economic circumstances…
Q: sing the data in the following table, and the fact that the correlation of A and B is 0.06,…
A: Standard deviation is the measure of risk and volatility of the stock it should be measured as…
Q: Assume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market…
A: The risk premium is referred to as the difference between the market return and the risk-free…
Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…
A: Standard deviation of stock = wherei is stock is beta of stock i is standard deviation of market
Q: Part 1 Calculate the annual returns. What was the arithmetic average annual return for stock B? 4+…
A: Arithmetic Average Return: It refers to the return on investment computed by adding the returns for…
Q: How to start this question? g) Use the following two stocks. Scenario Probability Stock A Stock B…
A: Stock A: Stock B:
Q: Calculate the lower bound to the 95th confidence interval given the following price and dividend…
A: Variables in the…
Q: a. Calculate the average rate of return for each stock during the 5-year period. Do not round…
A: Standard deviation is a statistical tool used to quantify the degree of variability or dispersion of…
Q: The market and Stock ) have the following probablity distributions: Probability TH 0.3 14% 19% 0.4…
A: Expected Return = sum of (Probability * Return) Variance = Sum of (Probability *(Return-Mean)^2)…
Q: calculate the standard deviation of returns.
A: Standard Deviation is the square root of the variance, which is the measurement of risk. And risk…
Q: What is the reward-to-risk ratio for Stock X, in decimal form? Round your answer to 4 decimal places…
A: The reward-to-risk ratio is the reward an investor can earn, for every dollar he or she risks. The…
Q: What is the covariance between each stock and the market index?
A: Covariance is used to characterize the connection between two random variables. It measures the…
Q: You are considering an investment in either individual stocks or a portfolio of stocks. The two…
A: Ans. a) The formula for average or expected return of stock is E(A) =∑inAi/n ( Where Ai is the…
Q: Stocks A and B have the following historical returns: Year 2016 2017 2018 2019 2020 20.05 a.…
A: The coefficient of variation is represented as it is considered as the ratio of a standard deviation…
Q: Year AT&T Stock Returns Market Index Returns 1 8…
A: Equation for stock return based on market return is constructed in this format: Y = mx +c Y is stock…
Q: 5. Given the following expectations for the next year, what is the expected return, standard…
A: To determine the Expected Return, Standard Deviation and Beta of Stock A from the data. Return on…
Q: Historical Returns: Expected and Required Rates of Return You have observed the following returns…
A: 1. Rate of Return: The rate of return is a financial metric that represents the gain or loss on an…
Q: Assume these are the stock market and Treasury bill returns for a 5-year period: T-Bill Return Year…
A: YearStock market returnT-bill…
Q: Based on the following information, calculate the expected return of Stock A: State of the Economy…
A: The expected return is the estimation of profit or loss that an investor determines from his…
Q: What is the standard deviation of Oliver's stock, giving the following information: Probability 30%…
A: Every investment has certain risk level which is arises due to fluctuations in market. Standard…
Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…
A: ParticularsStock AStock BBeta1.201.5R-square0.250.15σM16%
Q: Calculate the upper bound to the 95th confidence interval given the following price and dividend…
A: Price Dividend Dividend Yield$ 64.65 $1.72…
Q: You are given the following information concerning a stock and the market Year 2017 2018 2019 2020…
A: The unpredictability or fluctuation of investment results is referred to as risk and investments…
Q: Calculate the expected rate of return, , for Stock B ( = 12.00%.) Do not round intermediate…
A: Expected Return = Σ of Probability X Return ProbabilityReturnStock AStock BStock AStock…
Q: The index model has been estimated using historical excess return data for stocks A, B, and C, with…
A: "Hi there, thanks for posting the questions. But as per our Q&A guidelines, we must answer the…
Q: (Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common…
A: Return refers to the profit or loss generated from an investment over a specific period of time. It…
Q: Consider the following information: Rate of Return if State Occurs State of Economy Probability of…
A:
Q: You have estimated the following probability distributions of expected future returns for Stocks X…
A: Expected return of a stock refers to the amount of profit or loss that an investor can incur on his…
Q: Given the following price and dividend information, calculate the lower bound to the 95th confidence…
A: Step 1: Step 2: Step 3: Step 4:
Q: Consider the following information: State of Economy Probability of State of Economy Rate of Return…
A: Variables in the question:Note: Please check the dataFormula to be used:Expected Return=
Q: Stocks A and B have the following historical returns: Year Stock A's Returns, rA Stock B's Returns,…
A: A portfolio is a mix of financial assets that a person, business, or other entity has, including…
Q: Required: Investors expect the market rate of return this year to be 19.00%. The expected rate of…
A: Market return19%Beta of stock1.2Expected return22.80%New Expected return17.60%Using the capital…
Q: a. Determine graphically the beta coefficients for Stocks A and B. b. Graph the Security Market…
A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: the following hist Year 2016 2017 2018 2019 2020 Stock A's Returns, ra (15.40%) 29.00 14.25 (5.00)…
A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…
Q: Compute the abnormal rates of return for the following stocks assuming the following systematic risk…
A: Abnormal rate of return refers to the return that is earned by the stock which is greater than the…
Q: Review the following market information: Current Stock Market Return 11.25%…
A: As per CAPM, Required Return = Risk free Rate + Beta * (Market return - risk free rate) where, Risk…
Q: What is the reward-to-risk ratio for Stock X, in decimal form? Round your answer to 4 decimal places…
A:
Q: Historical Returns: Expected and Required Rates of Return You have observed the following returns…
A: Risk-free rate5%Market risk premium4%YearStock XStock…
![Given the information in the table below, what is the covariance between the return
series of stock A and B. Round your answer!
A
B
Year
Past Returns
Past Return
2017
20
16
2018
2
12
2019
-2
9
ER]
6.67
11.33
STD
11.72
3.51
W
50.00%
50.00%
PAB
0.9638
None of the answers is correct
55.24
50.33
33.12
39.65](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5536044b-f9cd-44e8-a2c8-b6a5212cae24%2F0ab1b88c-c8d6-401c-83bc-1b793cd77090%2Fbjprvd_processed.png&w=3840&q=75)
![](/static/compass_v2/shared-icons/check-mark.png)
Step by step
Solved in 2 steps with 1 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
- Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3.6% + 1.2RM + eA RB = -1.6% + 1.5RM + eB OM = 16%; R-squarea = 0.25; R-square; = 0.15 What is the covariance between each stock and the market index? (Calculate using numbers in decimal form, not percentages. Do not round your intermediate calculations. Round your answers to 3 decimal places.) Covariance Stock A Stock BSuppose your expectations regarding the stock price are as follows: State of the Market Boom Normal growth Recession Probability Ending Price 0.21 $ 140 0.30 110 0.49 80 Use the equations E (r) = Ep (s) r(s) and o² = Ep (s) [r(s) - E(r)]² to compute the mean and standard deviation of the HPR on S S HPR (including dividends) 50.5% 18.0 -12.5 stocks. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Mean Standard deviation Answer is complete but not entirely correct. 13.65 % 20.48 %Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (7 %) (26 %) 0.1 3 0 0.5 14 22 0.2 20 26 0.1 36 50 Calculate the expected rate of return, , for Stock B ( = 14.20%.) Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the standard deviation of expected returns, σA, for Stock A (σB = 18.68%.) Do not round intermediate calculations. Round your answer to two decimal places. % Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. Is it possible that most investors might regard Stock B as being less risky than Stock A? If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense. If Stock B is more highly correlated with the market than A, then it might have a higher…
- 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…Stocks A and B have the following historical returns:YearStock A's Returns, raStock B's Returns, ra2016(18.60%)(14.50%)201734.2520.40201814.7539.902019(1.00)(9.70)202026.7520.05a. Calculate the average rate of return for each stock during the period 2016 through 2020. Round your answers to two decimal places.Stock A:11.23%Stock B:11.23%b. Assume that someone held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would the realized rate of return on the portfolio have been each year? Round your answers to two decimal places. Negative values should be indicated by a minus sign.YearPortfolio2016-16.55%201727.33201827.33%2019-5.35202023.40What would the average return on the portfolio have been during this period? Round your answer to two decimal places.11.23c. Calculate the standard deviation of returns for each stock and for the portfolio. Round your answers to two decimal places.Stock AStock BPortfolioStandard Deviationd. Calculate the coefficient of variation for each…Consider the following information: Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Recession .20 .010 −.35 Normal .55 .090 .25 Boom .25 .240 .48 Calculate the expected return for the two stocks. Calculate the standard deviation for the two stocks.
- Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Recession .17 .08 −.12 Normal .58 .11 .17 Boom .25 .16 .34 a. Calculate the expected return for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)Historical Realized Rates of Return You are considering an investment in either individual stocks or a portíolio of stocks. The two stocks you are researching, Stock A and Stock B, have the folloving historical retums: Year 2015 -22.00% -4.00% 2016 34.00 17.00 2017 29.00 -15.00 2018 -2.00 46.00 2019 30.00 25.00 a. Calculate the average rate of return for each stock during the 5-year period. Do not round intermediate calculations. Round your ansvers to two decimal places. Stock A: Stock 8: b. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Do not round intermediate calculations. Round your ansviers to bwo decimal places. Negative values, if any, should be indicated by a minus sign. Year Portfolio 2015 2016 2017 2018 2019 Average return c. Calculate the standard deviation of returns for each stock…Assume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market Return (%) T-Bill Return (%) 2016 13.0 0.2 2017 21.0 0.8 2018 -6.2 1.8 2019 29.8 2.1 2020 20.6 0.4 Required: What was the risk premium on common stock in each year? What was the average risk premium? What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.)-- expressed in % (NOTE: 11.31% is incorrect)
- Fill in the missing information in the following table. Assume that Portfolio AB is 40 percent invested in Stock A. (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Year 2015 2016 2017 2018 2019 Average return Standard deviation Answer is complete but not entirely correct. Annual Returns on Stocks A and B Stock A Stock B 19.0 -32.0 42.0 18.0 30.0 15.40 56.45 11.0 33.0 -13.0 24.0 17.0 14.40 34.74 % % % % % % % % % % % % % % Portfolio AB 15.80 -6.00 20.00 20.40 24.80 15.00 24.32 % % % % % % %Consider the following information: Rate of Return If State Occurs State of Probability of State of Economy Stock A Stock B Economy Recession Normal .17 .05 .09 21 .62 .08 .25 Boom .21 16 a. Calculate the expected return for Stocks A and B. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 declmal places, e.g., 32.16.) b. Calculate the standard deviation for Stocks A and B. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a. Stock A expected return Stock B expected return b. Stock A standard deviation Stock B standard deviationConsider the following average annual returns for Stocks A and B and the Market. Which of the possible answers best describes the historical betas for A and B? Years Market Stock A Stock B 1 0.03 0.16 0.05 2 −0.05 0.20 0.05 3 0.01 0.18 0.05 4 −0.10 0.25 0.05 5 0.06 0.14 0.05 a. bA > +1; bB = 0. b. bA = 0; bB = −1. c. bA < 0; bB = 0. d. bA < −1; bB = 1. e. bA > 0; bB = 1.
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
![Corporate Finance (The Mcgraw-hill/Irwin Series i…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
![Corporate Finance (The Mcgraw-hill/Irwin Series i…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)