QUESTION 8GivenInvestment E(R) σStock A $15,000 10% 10%Stock B $5,0005% 25%Total $20,000and Corr(AB)=PAB = -0.25. Find the Portfolio Standard Deviation8.1779%5.8768.6779%6.557%8.4779%

Option e: This option is correct. Step 1:We have to calculate the standard deviation of the…

Answered: QUESTION 8 Given Investment E(R) σ…

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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Return rate
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Ch 8 Problem Sets: 2. The following are estimates for two stocks. Expected Return 13% 18 Stock A B Betal 0.8 1.2 The market index has a standard deviation of 22% and the risk-free rate is 8%. a. What are the standard deviations of stocks A and B? b. Suppose that we were to construct a portfolio with proportions: Stock 4: Stock B: T-bills: Firm-Specific Standard Deviation 30% 40 .30 .45 25 Compute the expected return, standard deviation, beta, and nonsystematic standard deviation of the portfolio.
1 what is the expected return on a portfolio that is invested 70 in k and 30 given the following information 25 75 16 12 13 8 A: 13.32% B: 12.25% C: 11.88% D: None are correct E: 11.13%
None
p 19 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 f 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 O Ak Risk (Standard Deviation to 5) 25% 12% 10% What is the expected retum of the optimal stock portfolio? Stock A B C O Multiple Choice O Return (R) 20% O 10% 15% 17.9% 15 15 19.15 36.4% Pair of Stocks A to B A to C to C Help Joint Risk (Covariance) 0.05 0.075 -0.05 Save & Exit Submit
#11
B20 x✓ fx A B 5 Earnings 6 4 Shares Outstanding Dividends, Per Share (Just Paid) 7 Return on Equity 8 Beta 9 10 Market Data 11 Market Return 12 Risk-Free Rate 13 25,000,000 $50,000,000 $1.25 0.15 1.35 Expected Return 0.12 0.03 14 Required: 15 16 Using the information in the tables above, complete the necessary steps to calculate the P/E ratio and the PEG ratio. 17 (Use cells A4 to B12 from the given information to complete this question.) 18 19 The M. Smith and Family Corporation 20 Capitalization Rate 21 Earnings Per Share 22 Plowback Rate 23 Sustainable Growth Rate 24 Price 25 P/E Ratio 26 Sustainable Growth Rate (as Percentage, use for PEG Calculation) 27 PEG Ratio 28 29 Calculations $2.00 0.375 0.056 5.625
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Problem 8-14 Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 4.0% +0.50RM + eA RB = -1.2% + 0.70RM + eB OM 17%; R-squareд = 0.26; R-squareg = 0.18 Assume you create a portfolio Q, with investment proportions of 0.40 in a risky portfolio P, 0.35 in the market index, and 0.25 in T-bill. Portfolio Pis composed of 70% Stock A and 30% Stock B. a. What is the standard deviation of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Standard deviation 10.98 c. What is the "firm-specific" risk of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 4 decimal places.) Firm-specific % Answer is complete but not entirely correct. 0.0025 x
8-21 capital of $500 million invested in five stocks: Stock Investment Stock's Beta Coefficient A $160 million 0.5 В 120 million 1.2 80 million 1.8 D 80 million 1.0 60 million 1.6 Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-e rate is 6%, and you believe the following probability distribution for future market retums is realistic: TT Probability Market Return 0.1 - 28% 0.2 0.4 12 0.2 30 0.1 50 What is the equation for the security market line (SML)? (Hint: First, determine the expected market return.) Calculate Kish's required rate of return. c. Suppose Rick Kish, the president, receives a proposal from a company seeking new capital. The amount needed to take a position in the stock is $50 million, it has ar expected return of 15%, and its estimated beta is 1.5. Should Kish invest in the new company? At what expected rate of return should Kish be indifferent to purchasang the stock? а. b.

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QUESTION 8 Given Investment E(R) σ Stock A $15,000 10% 10% Stock B $5,000 5% 25% Total $20,000 and Corr(AB)=PAB = -0.25. Find the Portfolio Standard Deviation 8.1779% 5.876 8.6779% 6.557% 8.4779%