mation for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Standard Deviation Stock Expected Return A 8.88% B с 10.82 12.76 HAR 14% 14 14 Beta 0.8 1.2 1.6 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 5%, and the market is in equilibrium. (T returns equal expected returns.) The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and per analysis to answer the questions below. X Open spreadsheet a. What is the market risk premium (rar)? Round your answer to two decimal places. b. What is the beta of Fund P? Do not round intermediate calculations

mation for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Standard Deviation Stock Expected Return A 8.88% B с 10.82 12.76 HAR 14% 14 14 Beta 0.8 1.2 1.6 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 5%, and the market is in equilibrium. (T returns equal expected returns.) The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and per analysis to answer the questions below. X Open spreadsheet a. What is the market risk premium (rar)? Round your answer to two decimal places. b. What is the beta of Fund P? Do not round intermediate calculations

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

See similar textbooks

Similar questions

Consider the following information for stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return Standard Deviation Beta A 11.45% 14% 0.9 B 12.55 14 1.1 C 15.30 14 1.6 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 6.5%, and the market is in equilibrium. (That is, required returns equal expected returns.) What is the market risk premium (rM - rRF)? Round your answer to one decimal place. % What is the beta of Fund P? Do not round intermediate
Consider the following information about three stocks: State of Economy Probability of State of Economy Rate of Return If State Occurs Stock A Stock B Stock C Boom.25.13.29.60 Normal .60.08.11.13 Bust.15.02.18-.45 a-1. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio expected return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.) a-3. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the expected T-bill rate is 3.70 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e .g., 32.16.) c-1. If the expected inflation rate is 3.30…
A portrollo consists of assets with the following expected returns: Technology stocks Pharmaceutical stocks Utility stocks Savings account a. What is the expected return on the portfolio if the investor spends an equal amount on each asset? Round your answer to two decimal places. % 26% 16 9 4 b. What is the expected return on the portfolio if the investor puts 53 percent of available funds in technology stocks, 15 percent in pharmaceutical stocks, 14 percent in utility stocks, and 18 percent in the savings account? Round your answer to two decimal places. %
Consider the following information for stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return Standard Deviation Beta A 6.95% 15% 0.7 B 8.35 15 1.1 C 10.45 15 1.7 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 4.5%, and the market is in equilibrium. (That is, required returns equal expected returns.) What is the market risk premium (rM - rRF)? Round your answer to one decimal place. % What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. % What would you expect the standard deviation of Fund P to be? Less than 15% Greater than 15% Equal to 15%
blackrock fund has expected return of 10.5 standard deviation of 17.5%and beta of 0.8 nippon fund expected return of 12.5% , standard deviation of 21%and beta of 1.1. the two mutual fund have correlation coefficient of0.7.find the expected return and standard deviation of the market.what is the riskless rate of return
1. The following table presents the expected returns of three stocks and the risk free rate. в 4% Stock A 8% Expected return What is the expected return and risk on an equally weighted portfolio composed of these four assets? The standard deviation of stock A is 10% and the covariance between A and B equals 0.0045. The correlation matrix between A, B and C is: 14% 4% Correl B A 1 0.3 0.7 B 0.3 0.5 0.5 Combining stocks A and C in a portfolio in equal proportions will result in a variance of 1.95%. 0.7
K -61 =1 2 N (Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Probability 0.25 0.50 0.25 Common Stock A Probability 0.25 0.25 0.25 0.25 (Click on the icon in order to copy its contents into a spreadsheet.) @ 2 a. Given the information in the table, the expected rate of return for stock A is 16.25 %. (Round to two decimal places.) The standard deviation of stock A is %. (Round to two decimal places.) b. The expected rate of return for stock B is%. (Round to two decimal places.) The standard deviation for stock B is%. (Round to two decimal places.) c. Based on the risk (as measured by the standard deviation) and return of each stock, which investment is better? (Select the best choice below.) 30² F2 W OA. Stock A is better because it has a higher expected rate of return with less risk B. Stock B is…
Consider the following information on Stocks I and II: The market risk premium is 8 percent and the risk-free rate is 40.5 percent. a-1. What is the beta of each stock? Note: Do not round Intermedlate calculations. Round your answers to 2 decimal places. a-2. Which stock has the most systematic risk? Stock I Stock II b-1. What is the standard deviation of each stock? Note: Do not round Intermedlate calculations. Enter your answers as a percent rounded to 2 decimal places. b.2. Which one has the most unsystemstic risk? Stock I Stock II c. Which stock is "riskier"? Stock I Stock II
Parts A-C have already been answered, looking for answer D.
Question
Consider the following information for stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return Standard Deviation Beta A B с 9.30% 10.35 12.10 14% 14 14 0.8 1.1 1.6 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 6.5%, and the market is in equilibrium. (That is, required returns equal expected returns.) a. What is the market risk premium (гM-TRF)? Round your answer to one decimal place. % b. What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. c. What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. % d. What would you expect the standard deviation of Fund P to be? I. Less than 14% II. Greater than 14% III. Equal to 14% -Select-
A portfolio analyst has been asked to allocate investment funds among three different stocks. The relevant data for the stocks is shown in the following table. If the goal is to maximize return while maintaining risk within acceptable bounds (in this case, a portfolio standard deviation of no more than 20%), find the proper allocation of the funds to each stock. Return Risk (Standard Deviation Stock (R) A 20% to S) 25% Pair of Stocks Joint Risk (Covariance) A to B 0.05 B 10% 12% A to C 0.075 C 15% 10% B to C -0.05 ces What proportion of the portfolio should be allocated to stock]B?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS