Problem 18-9 (Algo)Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 7%, and themarket's average return was 15%. Performance is measured using an index model regression on excess returns.Index model regression estimatesR-squareResidual standard deviation, o(e)Standard deviation of excess returnsStock A1% +1.2(rm -rf)Stock B2% +0.8(rm -rf)0.64111.4%22.7%0.46920.2%27.1%Required:a. Calculate the following statistics for each stock: (Do not round intermediate calculations. Round your answers to 4 decimalplaces.)> Answer is complete but not entirely correct.Stock AStock Bi. Alpha1.0000%2.0000%ii. Information ratio0.08770.0980. Sharpe ratio0.46700.3100iv. Treynor measure10.6000 x4.2000 X

AlphaAlpha is a measure of the excess return of an investment or portfolio compared to its benchmark…

Index model regression estimates R-square Residual standard deviation, o(e) Standard deviation of excess returns Required: Stock A Stock B 1% +1.2(rMr+) 2% +0.8(rm -rf) 0.641 0.469 11.4% 22.7% 20.2% 27.1% a. Calculate the following statistics for each stock: (Do not round intermediate calculations. Round your answers to 4 decimal places.) Answer is complete but not entirely correct. Stock A Stock B i. Alpha 1.0000 % 2.0000 % ii. Information ratio 0.0877 0.0980 iii. Sharpe ratio 0.4670 0.3100 iv. Treynor measure 10.6000x 4.2000

Index model regression estimates R-square Residual standard deviation, o(e) Standard deviation of excess returns Required: Stock A Stock B 1% +1.2(rMr+) 2% +0.8(rm -rf) 0.641 0.469 11.4% 22.7% 20.2% 27.1% a. Calculate the following statistics for each stock: (Do not round intermediate calculations. Round your answers to 4 decimal places.) Answer is complete but not entirely correct. Stock A Stock B i. Alpha 1.0000 % 2.0000 % ii. Information ratio 0.0877 0.0980 iii. Sharpe ratio 0.4670 0.3100 iv. Treynor measure 10.6000x 4.2000

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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Scenario 2: The following table shows the returns for the market index (Market - M) and the returns for two stocks (Asset X & Y) under three scenarios. Assume each scenario has an equal chance of occurring (33%). Bad Okay Good Market - M-5% 5% 15% Asset - X -2%-3% 25% Asset - Y -4%-6% 30% What is the correlation of "Asset - Y" to "Market M"? enter your number to two decimal places without the percent sign. Example 23% enter as .23.
Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock C splits two-for-one in the last period. A B C Po 82 42 84 00 100 200 200 Divisor P1 87 37 94 01 100 200 200 P2 87 37 47 92 100 200 400 Required: a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t=0 to t= 1). (Do not round intermediate calculations. Round your answer to 2 decimal places.) Rate of return I % b. What will be the divisor for the price-weighted index in year 2? (Do not round intermediate calculations. Round your answer to 2 decimal places.) D c. Calculate the rate of return of the price-weighted index for the second period (t=1 to t = 2).
The Beta for Stock Q is _____. Do not round intermediate work, but round your final answer to 2 decimal places (example: if your answer is 1.2345, you should enter 1.23). Margin of error for correct responses: +/- .03 expected return standard deviation covariance with S&P500 Stock Q 9% .0023 .0003 S&P500 10% 0.014 T-bonds 3%
Question IV: Suppose S =$100, K =$95, r =8% (continuously compounded), t =1, o =30%, and 8=5%. Use an eight- period lognormal binomial tree to answer the following questions. You can also use Excel for this question. If you do so, please upload the Excel file separately with the detailed calculations. (a) Construct the stock tree. (b) Compute the prices of an European call option. (c) Compute the prices of an American put option.
The index model has been estimated for stocks A and B with the following results: = 0.12 +0.670RM+еA RA= RB=0.04 +1.512RM + еB °M= 0.330 σ(eд) = 0.20 σ(eB) = 0.10 What is the covariance between each stock and the market index? (Round your answers to 4 decimal places.) Stock A covariance Stock B covariance
Suppose you are given the following information about 2 stocks, what is the Sharpe Ratio of a portfolio weighted 55% in stock A and 45% in stock B? E(RA)=16% E(RB)=8% σA=22% σB=12% σA,B=−0.003696 rf=3% Enter rate in decimal form, rounded to 4th digit, as in "0.1234"
please help with this question
Use the following information: Stock A B Good state 10% 14% Bad state 2% -2% Assume there is 60% probability that the good state occurs and 40% chance the bad state occurs. What is the standard deviation of stock A? (Please use 5 decimal places, this should be written in percentage, so an answer of 23.143% should be written as .23143)
Suppose you are given the following information about 2 stocks, what is the return standard deviation of a portfolio weighted 55% in stock A and 45% in stock B? E(RA)=16% E(RB)=8% σA=22% σB=12% σA,B=−0.003696 Enter rate in decimal form, rounded to 4th digit, as in "0.1234"
Suppose that the Index model for stocks A and B is estimated from excess returns with the following results: RA 3.5% 8.65RM + A Rg -1.6% +0.88RM + ep OM 21%; R-squareд 0.22; R-squareg 0.14 What are the covariance and the correlation coefficient between the two stocks? Note: Do not round intermediate calculations. Calculate using numbers in decimal form, not percentages. Round your answers to 4 decimal places. Covariance Correlation coefficient
Suppose you are given the following information about 2 stocks, what is the expected return of a portfolio weighted 55% in stock A and 45% in stock B? E(RA)=16% E(RB)=8% σA=22% σB=12% σA,B=−0.003696 Enter rate in decimal form, rounded to 4th digit, as in "0.1234"
Given the data in the table, calculate Beta and Covariance.

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