QUESTION 37 You have developed the following data on three stocks: Stocks Std. Deviation Beta A 0.45 0.60 B 0.60 0.75 C 0.55 1.50 If you are a risk minimizer, you should choose Stock a well-diversified portfolio. if it is to be held in isolation and Stock if it is to be held as part of A; A O B; A C; A O A; C O C; B 3.75 po 13
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- 27. You have developed the following data on three stocks:Stock Standard Deviation BetaA 0.15 0.79B 0.25 0.61C 0.20 1.29 If you are a risk minimizer, you should choose Stock ____ if it is to be held in isolation and Stock ____ ifit is to be held as part of a well-diversified portfolio.a. A; Ab. A; Bc. B; Ad. C; Ae. C; BFrage 32 1 Pkte. You have the following data on three stocks: Stock Standard Deviation Beta 0.15 0.79 0.25 0.61 C. 0.20 1.29 if it is to be held in isolation and Stock if it is to be held as As a risk minimizer, you would choose Stock part of a well-diversified portfolio. O A; B. O B; C. O C, A. O C, B.V1
- Consider the following data. Stock Standard Deviation Beta X 5% 1.37 Y 8% 0.61 To minimize risk, you should choose Stock _____ if held individually and Stock _____ if held as part of a well-diversified portfolio. X; Y Y; X There is not enough information to determine which stocks to hold. Y; Y X; XProblem 1 You are given the following information about stock X and the market portfolio, M: Riskless Asset (f) Stock X Market Portfolio (M) E(r) 0.04 (4%) ? 0.10 σ 0.00 0.30 0.20 You are not given the expected return of stock X. The correlation of the returns on the stock X and the market portfolio is equal to 0.4. a) What is the beta (6) of stock X? b) Assuming the CAPM holds, what is the expected return on stock X? c) You have $1,000 to invest in some combination of the risk-free asset, stock X, and the market portfolio. You are thinking of investing $300 in the risk free asset, $400 in stock X, and $300 in the market portfolio. What is the overall expected return, standard deviation and beta of this portfolio?Tiempo restante U:28:23 What is the beta of a portfolio that has $18,400 in Stock M, $6,320 in Stock N, $32,900 in Stock O and $11,850 in Stock P. Their Betas are .97, 1.04, 1.23, and .88, respectivley? O a. 1.04 O b. 1.11 О с. 1.08 O d. 1.15 O e. .99
- QUESTION 1 Exhibit 5.5 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Stock Rit Rmt ai Beta A 10.6 15 0 0.8 Z 9.8 8.0 0 1.1 Rit = return for stock i during period t Rmt = return for the aggregate market during period t Refer to Exhibit 5.5. What is the abnormal rate of return for Stock A during period t using only the aggregate market return (ignore differential systematic risk)? a. 4.40 b. −1.70 c. 3.40 d. −4.40 e. −1.86Question 6 Consider a market in which the returns on common stocks are described by the Fama-French Three Factor Model. The following table gives the factor sensitivities of Orange, Inc, Fallmart, and Vesla| Inc. stocks to each of the three factors. Security BSp500 BSMB Sensor, Inc. 1.5 -1.5 Contravent, Inc. 0.5 0.5 -0.5 Cosmo, Inc. 1.3 1.1 -0.8 a. Consider a portfolio, made up by selling short $10,000 of Contravent stocks and buying $10,000 of Sensor and $5000 of Cosmo. How sensitive will this portfolio be to each of the three factors? b. What is the expected return of your portfolio in (a) if the expected return on the S&P 500 index is 15%, the expected return on the SMB factor is 4%, the expected return on the HML factor is 2% and the risk free rate is 0.5% c. What is the systematic volatility (standard deviation of returns) of your portfolio in (a) given that the volatility of the S&P 500 index is 16%, the volatility of the SMB factor is 20% and the volatility of HML factor is 10%?Question: State Probability Return on Stock XXX Cement Return on Stock YYY Cement Return on Stock ZZZ Cement 1 25% 21 23 20 2 15% 19 25 22 3 20% 20 24 24 4 15% 22 22 26 5 Find? 23 26 28 Use the above information and to answer the following: Assume you are the investor who wants to invest in a two stock/security portfolio made from the above Stocks of your choice? a) Find the expected return of your portfolio formed from the stocks of your choice given above AND you decide the weights for the stocks in the portfolio. b) Calculate your returns from the portfolio assuming you invest $ 15000 c) Find the Covariance and correlation coefficient for your portfolio d) Justify as to on what basis did you choose these stocks and how did you decide the weights?
- Y8 Please answerSubject: Financia; strategy & policy Question No 2 (part i) Answer the following. i) Consider the following information for three stocks, Stocks X, Y, and Z. 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 X 9.00% 15% 0.8 Y 10.75 15 1.2 Z 12.50 15 1.6 Fund Q has one-third of its funds invested in each of the three stocks. The risk-free rate is 5.5%, and the market is in equilibrium. (that is, required returns equal expected returns.) a) What is the market risk premium (rM – rRF)? b) What is the beta of Fund Q? c) What is the expected return of Fund Q? d) Would you expect the standard deviation of Fund Q to be less than 15%, equal to 15%, or greater than 15%? Explain.V Quiz# 5 (Q) The following are estimates for four risk assets (A,B,C,D). The portfolio P is an equal weighted portfolio of the four risk assets. weight B Systematic Residual Total risk (S.D.) risk (S.D.) risk(S.D.) Stock A 0.25 0.8 16% 30% 34.0% Stock B 0.25 1.0 20% 35% 40.3% Stock C 0.25 1.2 24% 45% 51.0% Stock D 0.25 1.4 28% 40% 48.8% Portfolio P 1.00 Calculate systematic risk (standard deviation of systematic return) of the portfolio (%) Calculate residual risk (S.D.) of the portfolio (%) 3Calculate Pearson correlation between returns of A and B (Round to the third decimal place) 4 Explain why The CAPM is not testable (10-30words)