Problem 6-6 (Algo) Consider the following table: Scenario Probability Stock Fund Rate of Return Bond Fund Rate of Return Severe recession 0.10 -44% -11% Mild recession 0.20 -24% 17% Normal growth 0.40 29% 10% Boom 0.30 34% -7% Required: a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 2 decimal places.) b. Calculate the value of the covariance between the stock and bond funds. (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Problem 6-6 (Algo) Consider the following table: Scenario Probability Stock Fund Rate of Return Bond Fund Rate of Return Severe recession 0.10 -44% -11% Mild recession 0.20 -24% 17% Normal growth 0.40 29% 10% Boom 0.30 34% -7% Required: a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 2 decimal places.) b. Calculate the value of the covariance between the stock and bond funds. (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

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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Consider the following information: State of Economy Probability of State of Economy Boom Bust .68 .32 a. Expected return b. Variance of portfolio Rate of Return if State Occurs Stock A Stock B Stock C .36 -.16 % 11 .25 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, b. What is the variance of a portfolio invested 23 percent each in A and B and 54 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. .05 .31
Question 2 You have the following information: A B C Market Alpha 1% 2% 3% 0% Beta 2 1.5 0.5 1 Res. 1.00% 2.00% 0.90% 0.00% Variance Std.Dev 9% 15% 12% 8% Excess 6% Return What is the alpha of the active portfolio? Note: Round to 3 decimals. The margin of error here is +/-0.01. D -2% 2 0.85% 11%
6. Fund A Fund B Expected Ret. E(r) 13.4 % . 10.8% Standard Deviation - 13 %. 15.8% The table above contains expected annual returns for funds A and B. Assuming that the risk free rate is 2.55% and that the correlation of returns between funds A and B is -0.18, calculate the weight of Fund A in the minimum - variance two - risky asset portfolio comprised of funds A and B.
Consider the following table: Scenario Probability Stock FundRate of Return Bond FundRate of Return Severe recession 0.10 −41% −14% Mild recession 0.20 −21% 20% Normal growth 0.40 26% 13% Boom 0.30 31% −10% Required: a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 2 decimal places.) b. Calculate the value of the covariance between the stock and bond funds. (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)
Consider the following table: Scenario Probability Stock FundRate of Return Bond FundRate of Return Severe recession 0.10 −43% −12% Mild recession 0.20 −17.0% 12% Normal growth 0.30 17% 6% Boom 0.40 31% 4% Required: a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 4 decimal places.) b. Calculate the value of the covariance between the stock and bond funds
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Finance State Probability Stock ABC Stock DEF Depression .3 -.10 - .05 Normal .3 .10 .12 Boom .4 .16 .08 What is the correlation between Stock ABC and Stock DEF?What is the standard deviation of return for Stock DEF?What is the expected return for Stock ABC?show how to solve this and answer Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Do not provide Excel Screet shot rather use tool table Answer completely.
Fund A Fund B Expected Ret. E(r) 13.2% 8.3% Standard Deviation - \sigma 15.5% 14.7% The table above contains expected annual returns for funds A and B. Assuming that the risk free rate is 1.34% and that the correlation of returns between funds A and B is 0.32, calculate the weight of Fund A in the Optimal two - risky asset portfolio comprised of funds A and B. Note: Enter your answer in percentages rounded to the nearest one digit after the decimal point. For example, if the weight of Fund A is 15.437% or 0.15437, enter it as: 15.4
Question 11: You regress the monthly returns of XYZ fund for the past five years against three factors (i.e. Market factor = 1.2, SMB factor = −0.3, HML factor = 1.4)). What do these coefficient values mean and what type of stocks does the fund probably hold?
Exercice 5 ( Answer question 7 to 9) The expected return on treasury bills E(RF)= 4% Calculate the expected return E(.) for the market portfolio, the FGL security and the SDL Calculate the variance and standard deviation for the market portfolio, FGL security and SDL Calculate the covariance between the market portfolio and the FGL security, and the covariance between the market portfolio and the SDL Calculate the correlation coefficient between the market portfolio and the FGL security, and the correlation coefficient between the market portfolio and the SDL security. Calculate the beta of FGL stock relative to the market portfolio with two different methods. Calculate the beta of the SDL stock relative to the market portfolio with two different Calculate the expected return of the Pfl portfolio composed of 70% FGL stock and 30% SDL stock, what is the beta of this portfolio? Using CAPM assess the performance of FGL and SDL securities, Are they overvalued or undervalued? Which of…
Illustration 2 Annual returns for three funds and a market index are given below: Fund A Fund B 17.1 14.5 28.1 19.7 Beta(Bp) 1.20 0.92 Risk free rate= 8.6% Required: Performance evaluation of the 3 funds Rp Op Fund C 13 22.8 1.04 Rm 11 20.5 1.00

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