Maria has a portfolio consisting of 7 shares of stock A (purchased for $70 per share) and 4 shares of stock B (purchased for $100 per share). Sheassumes the expected rates of returns after 1 year will be 0.02 for stock A and 0.15 for stock B, with variances of 0.04 and 0.18, respectively.The expected rate of return after 1 year for Maria's portfolio is 0.0784intermediate calculations.)0.0784Complete the table below by computing the standard deviation 0.2600 turns after 1 year on the portfolio if the stocks' returns have a coefficient ofcorrelation of -0.4, are uncorrelated, and are perfectly correlatCoefficient of Correlation BetweentheReturns of Stock A and B (p)p= -0.4P = 0.0P = 1.00.0850(Hint: For best results, retain at least four decimal places for any0.1100Standard Deviation orReturn [VV(Rp)]

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Answered: Maria has a portfolio consisting of 7…

Advanced Engineering Mathematics

10th Edition

ISBN:9780470458365

Author:Erwin Kreyszig

Publisher:Erwin Kreyszig

Chapter2: Second-order Linear Odes

Section: Chapter Questions

Problem 1RQ

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If the life expectacy in county A is 65 years with CI of (55, 75) and in county B is 87 years with CI of (85, 90), are the two life expectancies likely to be statistically different?
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Suppose that the borrowing rate that your client faces is 9%. Assume that the equity market index has an expected return of 13% and standard deviation of 25%, that rf = 5%. Your fund manages a risky portfolio, with the following details: E(rp) = 11%, p = 15%. What is the largest percentage fee that a client currently lending (y 1)? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 1 decimal place.) y 1
Example 10: P and Q two securities, with expected returns of 15% and 24% respectively, and standard deviation of 35% and 52% respectively. Calculate the standard deviation of a portfolio weighted equally between the two securities if their correlation is -0.9.
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Q3. Suppose that the market default rate for bonds is given by 0.01, i.e., the probability the market believes that the company may not be able to pay the owner of the bonds is 0.01. Now a credit default swap (CDS) is sold at fair price $ 0.01 per unit. Ackman expects that the true default rate is 0.05, not 0.01. Ackman bought 67 billion units of CDS at the price $ 0.01 per unit. a. Suppose that Ackeman's expectation about the default rate is not correct. I.e., the true default rate for bonds is given by 0.01. Find the cost of the purchase. Find the expected payoff. Find the profit. b. Suppose that Ackeman's expectation is correct. Find the cost of the purchase. Find the expected payoff. Find the profit.
Compute the NPV statistic for Project Y if the appropriate cost of capital is 12 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.) Project Y Time: 1 2 3 4 Cash flow: -$8,000 $3,350 $4,180 $1,520 $300
If the life expectacy in county A is 65 years with CI of (55, 75) and in county B is 87 years with CI of (40, 98), are the two life expectancies likely to be statistically different?
3. Show your complete solution.
If the expected return on the market is 8% and the risk for your rate is 4%. What is the expected return for a stock with a beta equal to 2.00?
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