Martinez Inc. is exploring the risk of different portfolio allocations between two stocks.Complete the following table. (Round intermediate calculations to 8 decimal places, e.g. 0.25121516 and final answers to 6 decimal places,eg. 15.251213% or 15.251213.)Weight in stock 1Weight in stock 2Standard deviation of stock 1Standard deviation of stock 2Covariance between stocks 1 and 2Correlation between stocks 1 and 2Portfolio variancePortfolio standard deviationCase 140 %602.2.%0.029%27.2 %%Case 235 %6556,67468619.90.019%%%25.8 %

Standard deviation refers to teh method used for measuring the dispersion of set values in relation…

Answered: Martinez Inc. is exploring the risk of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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
Sh19 Please help me. Solution
A 277.
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= 5.0% + 1.30RM + eA RB= -2.0% + 1.6RM + eB sigmaM= 20% ; R-squareA= 0.20 ; R-squareB= 0.12 What is the standard deviation of each stock (write as percentage, rounded to 2 decimal places)?
Vijay
The following table shows estimates of the risk of two well-known Canadian stocks: Standard Deviation (%) R2raise to the power of 2 Beta Standard Error of Beta Sun Life Financial 25.7 0.19 0.93 0.12 Suncor Energy 26.5 0.02 0.70 0.27 What proportion of each stock’s risk was market risk, and what proportion was specific risk? What is the variance of the returns for Sun Life Financial stock? What is the specific variance? What is the confidence interval on Suncor’s beta? If the CAPM is correct, what is the expected return on Sun Life? Assume a risk-free interest rate of 4% and an expected market return of 14%. Suppose that next year, the market provides a 14% return. Knowing this, what return would you expect from Sun Life?
Utilizing the information below on 2 recently purchased stocks, compute the risk of the portfolio for the different levels of correlation between the 2 securities: Stock A B Expected Return 0.14 0.17 Std Dev of returns 0.11 0.11 Proportion invested 0.35 0.65 Correlation coefficient 1 0.4 0.1 0 -0.4 -1
Stocks A and B have the following returns: (Click on the following icon in order to copy its contents into a spreadsheet.) 123 45 Stock A 0.09 0.07 0.13 -0.01 0.09 Stock B 0.05 0.01 0.06 0.02 -0.04 a. What are the expected returns of the two stocks? b. What are the standard deviations of the returns of the two stocks? c. If their correlation is 0.42, what is the expected return and standard deviation of a portfolio of 60% stock A and 40% stock B?
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 38+0.7RM + eA + eB RB-28+1.2RM OM 20%; R-squareд 0.20; R-squareg = 0.12 What is the standard deviation of each stock? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Stock A Stock B = Standard Deviation % %
(Explain well all question with proper answer. ).
Calculate the standard deviation of a portfolio with 0.24 invested in Asset A, 0.33 invested in Asset B, and the rest invested in Asset C. Express your answer as a decimal with four digits after the decimal point (e.g., 0.1234, not 12,34%). Std Dev(A) = 0.43, Std Devirg) = 0.67. Std Dev(rc)=0.53 Correlation(A) =-0.24, Correlation(Arc)-0.32, Correlationirere)=0.09 Type your answer.....

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