Problem 13-10 Returns and Standard Deviations [LO1] Consider the following information: Probability of State State of Economy of Economy Boom Good Poor Bust 55 25 05 a. Expected return b-1. Variance b-2. Standard deviation Rate of Return if State Occurs Stock A Stock B Stock C 43 23 18 05 Your portfolio is invested 26 percent each in A and C, and 48 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-1. What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.) b-2. 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.) 10.86 % -08 -18 14.35 % -.06 -10

Problem 13-10 Returns and Standard Deviations [LO1] Consider the following information: Probability of State State of Economy of Economy Boom Good Poor Bust 55 25 05 a. Expected return b-1. Variance b-2. Standard deviation Rate of Return if State Occurs Stock A Stock B Stock C 43 23 18 05 Your portfolio is invested 26 percent each in A and C, and 48 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-1. What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.) b-2. 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.) 10.86 % -08 -18 14.35 % -.06 -10

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 1PROB

See similar textbooks

Similar questions

10. Returns and Standard Deviations [LO1] Consider the following information: Rate of Return If State Occurs
11.1 Expected Return and Standard Deviation This problem will give you some practice calculating measures of prospective portfolio performance. There are two assets and three states of the economy: (3) (1) State of Economy (2) Probability of State Stock A Rate of Return (4) Stock B Rate of Return of Economy if State Occurs if State Occurs Recession .10 .30 Normal -.20 .10 .60 .20 Boom .30 .70 .50 What are the expected returns and standard deviations for these two stocks? (See Problem 7.)
ff2
11.9 Returns and Standard Deviations Consider the following information: State of Economy Probability of SE Rate of Return if State Occurs. Stock A Stock B Stock C Boom .20 .24 .45 .33 Good .35 .09 .10 .15 Poor .40 .03 -.10 -.05 Bust .05 -.05 -.25…
Question 17 Consider the following graph of the efficient frontier. Which of the following portfolios is attainable and efficient? Portfolio G Portfolio E Portfolio A Portfolio D
10-13
Question 14 If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently. and assume the rísk-free rate is 2.5%. A) Portfolio Expected Return Beta A 17.5% 1.5 Market 12.5% 1.0 B) Portfolio Expected Return Standard Deviation A 8.5% 18.0% Market 10.0% 24.0% Portfolio Expected Return 13.5% 10.0% Beta A 1.2 Market 1.0 D) Portfolio Expected Return Beta A 7.5% 0.6 Market 10.0% 1.0 Option D Option A Option C Option B
Returns State of Economy Prob J K Recession 0.25 -0.02 0.034 Normal 0.6 0.138 0.062 Boom 0.15 0.218 0.092 Based on the following information, a.What are the covariance and correlation between the returns of the two stocks? b.Calculate the portfolio return and portfolio standard deviation if you invest equally in each asset.
5 Consider the following information: Probability of State of State of Economy Boom Good Poor Bust Economy 15 .45 .35 .05 a. Rate of Return if State Occurs a. Expected return b-1. Variance b-2. Standard deviation Stock A Stock B Stock C .36 46 .26 .21 .17 10 -.03 -.17 Your portfolio is invested 22 percent each in A and C, and 56 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-1. What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.) b-2. 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.) % -.06 -.21 % -.04 -.07
STOCK R R PROB A B 30% 3% 5% 60% 7% 9% 10% 12% -3% IF Risk free IS 3% DEGREE OF RISK AVERSE IS 4.5 WHAT IS THE RETURN STANDARD DEVIATION COV AND CORRELATION OF A, B ? WHAT IS THE MINUMIM VARAINCE PORTFOLIO ? WHAT IS THE OPTIMAL VARIANCE PORTFOLIO?````
D4
M4