J&J has expected returns of 7% with a standard deviation of 10%. The W company has expected returns of 16% with a standard deviations of 20%. The correlation of returns between these two companies is 22% (same as 7 above). Now calculate the expected return and standard deviation of a portfolio that consist of a long position of £10,000 in J&J and a short position of £2,000 in W?

J&J has expected returns of 7% with a standard deviation of 10%. The W company has expected returns of 16% with a standard deviations of 20%. The correlation of returns between these two companies is 22% (same as 7 above). Now calculate the expected return and standard deviation of a portfolio that consist of a long position of £10,000 in J&J and a short position of £2,000 in W?

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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Fremont Enterprises has an expected return of 14% and Laurelhurst News has an expected return of 19%. If you put 44% of your portfolio in Laurelhurst and 56% in Fremont, what is the expected return of your portfolio? The expected return on the portfolio is \%. (Rounded to two decimal places.)
Frontyard Inc has a beta of 0.9. The risk-free rate is 2.5% and the market risk premium is equal to 7%. The company is expected to pay a dividend of $2 per share. The current stock price is equal to $40. Dividends are expected to grow at a constant rate, g a. Calculate the required rate of return r, using the CAPM model The required rate of return r, is equal to b. Calculate the growth rate of dividends g c. Calculate Do Do S d. Calculate Ps De S Ps= S
Fremont Enterprises has an expected return of 13% and Laurelhurst News has an expected return of 22%. If you put 40% of your portfolio in Laurelhurst and 60% in Fremont, what is the expected return of your portfolio? The expected return on the portfolio is %. (Rounded to two decimal places.)
Company Q has earnings of $3.00 per share, a market price of $25, and a beta of 1.25. The risk-free rate is 3% and the risk premium for the market as a whole is 5%. What is the current rate of return for investing in company Q? What is the current "reward-to-risk ratio" for Company Q?
Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 33% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 4%. Calculate the utility levels of each portfolio for an investor with A = 2. Assume the utility function is U = E(r) Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Negative amounts should be indicated by a minus sign. - 0.5 × Ag². X Answer is complete but not entirely correct. WIndex U(A = 2) 0.0111 0.0504 0.0808 x 0.1026 0.1164 X 0.1200 X WBills 0.0 0.2 0.4 0.6 0.8 1.0 1.0 0.8 0.6 0.4 0.2 0.0
If the risk free rate is 4.4%, the expected return on the market portfolio (i.e., Rm)( is 11.6%, and the beta of Stock B is 0.9 , what is the required rate of return for Stock B according to the Capital Asset Pricing Model (CAPM)? (Round your answer rounded to one decimal place and record without a percent sign). Your Answer: If the risk free rate is 1.2%, the market risk premium (i.e., Rm - Rf) is 13.5%, and the beta of Stock B is 1.9 , what is the required rate of return for Stock B according to the Capital Asset Pricing Model (CAPM)? (Round your answer rounded to one decimal place and record without a percent sign). Your Answer:
Assume that the CAPM is true, Rf = 5%, Rm= 15% σm = 0.1. An investor with $10,000 to invest builds a portfolio, Q, of T-bills and the market portfolio. This means that: a) it would be possible for the investor to obtain a return of 17% on portfolio Q b) if portfolio Q were composed of short-selling $2,000 in T-bills and the remainder is the market portfolio, then Pqm = 1, βq = 1.2 and σq = 0.12 c) to obtain a return of 17% from portfolio Q the investor would need to invest $12,000 in the market portfolio d) all of the above are true e) only a) and b) above are true. Pls show procedure, thanks
2 local Philippine equities have the same risk (standard deviation) and return expectations: 10 % expected return and 20 % risk in terms of standard deviation. Suppose you wish to create an equally weighted portfolio (50% in each equity) to examine the effect of correlation on standard deviation/risk. Calculate the expected portfolio return and risk if the correlation is 1.0.
The Beta Company produces pneumatic equipment. Its beta is 1.8, the market risk premium is 9.5%, and the current risk-free rate is 1%. What is the expected return for the Beta Company?
Solve step by step
Bhupatbhai
Assume the market return is 14% with a standard deviation of 20%, and risk-free rate is 8%. The average annual returns for Managers D, E, and F are 13%, 17%, and 16% respectively. The corresponding standard deviations are 18%, 22%, and 23%. What are the Sharpe ratios for the market and managers?

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