iנencesProblem 13-5 Calculating Expected Return [LO1]Consider the following information:State of EconomyRecessionBoomEconomyProbability ofPortfolioState ofReturn if StateOccurs-202835.65Calculate the expected return. (Do not round intermediate calculations and enter youranswer as a percent rounded to 2 decimal places, e.g., 32.16.)Expected return%

Given, Probability of Recession = 0.35Return in Recession = -0.20 Probability of Boom = 0.65Return…

Answered: i נ ences Problem 13-5 Calculating…

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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State of the economy Boom Bust 0.05 0.02 You MUST use 4 digits in every calculation you do in order for your answer to be the same as the one in the system. When entering your answer, round to the nearest 0.01% but do not enter the % sign. For example, if your answer is 3.484% enter 3.48; if your answer is 0.12013 then enter 12.01 What is the expected return of a portfolio with 20% in asset A and 80% in Asset B? What is the variance of the portfolio with 20% in asset A and 80% in Asset B? Prob. of the state of economy 0.75 0.25 Rate of return if state occurs Stock A Stock B 0.15 0.02
FIGURE 4.44 A B 0.27 A2 0.73 0.45 0.55 Al (0.5) $8 $0 (0.5) $15 $4 $10 $0 Ⓒ Cengage Leaming > 4.9 Create risk profiles and cumulative risk profiles for all possible strate- gies in Figure 4.44. Is one strategy stochastically dominant? Explain. 4
39. Consider the following information. Assuming this represents the Population. Investment X 4% -10% 8% 8 Year 1 2 3 14% Investment Y -6% 8% 12% -2% Risk Free Rate: 2% The Covariance of Investment X and Investment Y is (Hint: Covariance = 1/nΣ(xi — Xavg)(yi - Yavg) A. -32.60 B. -21.00 C. +144.82 D. -103.50 E. +114.34
INV 2 -1b You are considering an investment in a portfolio P with the following expected returns in three different states of nature: Recession Steady Expansion Probability 0.10 0.55 0.35 Return on P -15% 20% 40% The risk-free rate is currently 4%, and the market portfolio M has an expected return of 16% and standard deviation of 20%, and its correlation with P is .7. What is the portfolio P’s beta?
Question: Answer using excel not CHAT GPT J14 X ✓ fx A B C D E F G The information contained in the table below shows the expected return and standard deviation for the market and Treasury Bills. 1 2 3 4 Market Data 56 Treasury Bills S&P 500 7 8 Required: 9 10 Rate of Return Standard Deviation 4.25% 12.00% 0.00% 21.00% Using the information in the table above and the varying risk aversions below, please calculate allocations to the risky and risk-free assets. 11 (Use cells A5 to C6 from the given information to complete this question.) 12 13 Risk Aversion Percent Allocated to the Market (S&P 500) Percent Allocated to Treasury Bills 14 4.00 15 2.00 16 1.50 Graded Worksheet Workbook Statistics +
F1
Finance
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Table A State of the Economy Probability 20% Steady Recession 35% Retum in state 7% -3% 15% Table A shows the states of the economy, the probability of being in that state and the return on a particular stock during that state of the economy. What is the expected return of the stock, given the intamallion in the tow 4.10% 6.33% 8.33% None of the answers isted here.
QUESTION 40 The potential losses are sorted in the following table. The absolute VaR is £8 Million. What is the relative expected shortfall from the mean? Sorted returns Returns (£ Million) -12 -10 -8 -6 -4 -3 -1.5 OA. 4.64 B.-11 C.-6.36 D.2.64
INV2 P1 3 You are considering an investment in a portfolio P with the following expected returns in three different states of nature: Recession Steady Expansion Probability 0.10 0.55 0.35 Return on P -15% 20% 40% The risk-free rate is currently 4%, and the market portfolio M has an expected return of 16% and standard deviation of 20%, and its correlation with P is .7. Does portfolio P have a positive or negative alpha relative to its required return given its level of risk?
Problem 13-28 SML (LO1, 4) Suppose you observe the following situation: Probability of State 0.15 0.60 0.25 State of Economy Recession Normal Irrational exuberance Stock A Stock B Rate of Return if State Occurs Stock B Stock A % -0.14 0.07 0.42 a. Calculate the expected return on each stock. (Round the final answers to 2 decimal places.) Expected Return % % -0.12 0.07 0.22 b. Assuming the capital asset pricing model holds and stock A's beta is greater than stock B's beta by 0.65, what is the expected market risk premium? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Expected market risk premium

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