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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Portfolio Expected return Standard deviation Q 7.8% 10.5% R 10.0% 14.0% S 4.6% 5.0% T 11.7% 18.5% U 6.2% 7.5% Q) If you are only willing to make an investment with a standard deviation of 7.0%, is it possible for you to earn a return of 7.0%?
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АВ С 8% 13% 5% Asset Return Standard Deviation12%20%0% Cov(A,B) There are two types of investors in the market. Investor X: has a Risk aversion level of 0.5 Investor Y: has a Risk aversion level of 4.5 For both investors find the respective weights of assets in (1) optimal risky portfolio and the (2) optimal complete portfolio given the following market situations: Lending is allowed at risk-free rate and rowing is allowed at 7% 72
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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.
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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

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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%