Problem 6-6 (Algo) Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Mean return Variance Probability 0.10 % 0.20 0.40 0.30 Stock Fund Rate of Return -37% -17% 22% 27% Bond Fund Rate of Return 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.) -10% 16% 9% -6%

Problem 6-6 (Algo) Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Mean return Variance Probability 0.10 % 0.20 0.40 0.30 Stock Fund Rate of Return -37% -17% 22% 27% Bond Fund Rate of Return 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.) -10% 16% 9% -6%

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 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
The following performance data about the Big Gain Fund & the S&P 500 appears below Big Gain S&P 500 Return 40% 22% Standard Deviation 32 % 20% Beta Value 1.26 1.00 The risk free rate is 5% Required i. Calculate the sharpe ratio ii. The Treynor measure iii. And Jensen's iv. Comment on the results obtained
8. A portfolio consists of bonds, stocks, commodities and real estates. The portfolio weightings, expected returns, variances and correlation matrix are shown below. Weight Expected Return Variance (%2) Bonds 50% 10% 15% 25% 8% 12% 20% 16% 10 30 15 20 0.1 0.3 0.4 0.6 1.0 0.2 1.0 Stocks Commodities Real Estate Correlation Matrix Bonds 1.0 -0.2 1.0 Stocks Commodities Real Estate Bonds Stocks Commodities Real Estate Calculate the standard deviation of the return of the portfolio.
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.)
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Consider the following portfolio of assets: Loan Weight 1 0.30 2 0.70 Expected returni ம σ2 13% 11% 9.06% 82.0% P12=-0.87 8.72% 76.0% 012-75.0% What is the variance of the portfolio (round to two decimals)? Note: a^2 denotes the square of a. For example, 2^2 = 4, 3^2=9 (0.3)^2*(82.0%) + (0.7)^2*(76.0%) + (0.3) (0.7)(-0.87) (9.06%) (8.72%) = 30.19 (0.3)^2 (82.0%) + (0.7)^2*(76.0%) + 2(0.3) (0.7)(-0.87) (9.06 %) (8.72%) = 15.75 (0.3)^2*(82.0%) + (0.7)^2*(76.0%) + [(0.3) (0.7)]^2 (-0.87) (9.06%) (8.72%) = 41.59 (0.3) (82.0%) + (0.7) (76.0%) + 2(0.3) (0.7)(-0.87) (9.06 %) (8.72%) = 48.93
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…

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