State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Stock C .58 .14 .42 .16 a. b. Boom Bust .22.40 .06-.05 What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the variance of a portfolio invested 22 percent each in A and B and 56 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.)

State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Stock C .58 .14 .42 .16 a. b. Boom Bust .22.40 .06-.05 What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the variance of a portfolio invested 22 percent each in A and B and 56 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.)

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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USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM Investment Beta Analyst's Estimated Return Stock X 2.3 15.5% Stock Y 1.2 13.6% Market Portfolio 1.0 11.5% Risk-free rate 4.0% What is the required rate of return for Stock X based on the capital asset pricing model (CAPM)?
d. Compute the portfolio return and portfolio risk if the Stock A and Stock B are combined equally in a portfolio. 19. Consider the three factor APT model Factor Risk Premium Change in GNP 5% Change in energy prices -1 Change in long-term interest rates +2 Calculate the expected rate of return on the following stocks. The risk free interest rate is 7% a. A stock whose return is uncorrelated with all three factors b. A stock with average exposure to each factor (i.e., with b = 1 for each) c. A pure play energy stock with high exposure to the energy factor (b-2) but zero exposure to the other two factors /20. Maroc Group of Companies (MGC) Ltd is considering an investment in an equipment costing GHC80,000. The equipment would attract a 25% annual written down allowance. The operating cash 1lows are expected to be as follows: Year GHC 30,000 2 40,000 3. 20,000 The investment would also require additional working capital of GHC25,000 in the year of investment which will be recovered at the…
Please help me find the variance on this 3 stock portfolio.
Suppose a portfolio is given as follows: Investment Name ABC Corn Mill X-Treme Manufacturing b.) 3.6% Ob.) none listed a.) none listed a.) 4.5% a.) 4% b.) 4% b.) 3.4% Weight a.) 5% 0.4 0.6 a.) What is the expected return of the portfolio? b.) What is the standard deviation of the portfolio if the correlation is +0.4? Select the most appropriate responses below for parts a.) and b.). Expected Return 2% 7% Standard Deviation 2% 5%
QUESTION 1 Under which of the following scenarios, the minimum variance portfolio that contains two stocks has the smallest standard deviation? OA. The correlation between the two stock returns is -1 OB. The correlation between the two stock returns is -0.2 OC. The correlation between the two stock returns is 0.2 OD. The correlation between the two stock returns is 0.5
Vijay
The beta coefficient A stock’s contribution to the market risk of a well-diversified portfolio is called Q1. ______risk. It can be measured by a metric called the beta coefficient, which calculates the degree to which a stock moves with the movements in the market. Q2. Based on your understanding of the beta coefficient, indicate whether each statement in the following table is true or false: Statement True False Over time, a stock with a beta of 1.0 produces a return that goes up and down with a 1:1 relationship with the return on the market. Beta measures the volatility in stock movements relative to the market. A stock that is more volatile than the market will have a beta of less than 1.0. Q1. Option 1 Unsystematic or Option 2 Relevant. Please provide true or false answers. Thank you!
pm.2
Question A You are given the following data on two stocks (A and B): Stock A Stock BExpected return 10% 12%Variance 0.04 0.09You are unsure about the correlation of the two stocks. What is the highest possible variance for an equally-weighted portfolio? (Hint: think about which assumption on the correlation leads to the highest portfolio variance) Group of answer choices 0.0625 0.0535 0.0650 0.0400 Full explain this question and text typing work only We should answer our question within 2 hours takes more time then we will reduce Rating Dont ignore this line
2. Consider the following expected returns, volatilities, and correlations: Expected Standard Stock Return Deviation Correlation with Vital Correlation with Mital Correlation with Pital Vital 14% 6% 1.0 -1.0 0.0 Mital 44% 24% -1.0 1.0 0.7 Pital 23% 14% 0.0 0.7 1.0 a. Imagine a portfolio comprising solely of Vital and Mital. What portion of should be allocated to Vital stock to ensure a risk-free investment? your investment b. What is the portfolio's volatility when holding a $10,000 long position in Pital and a $2000 short position in Mital? wwwww c. In a market, there are two securities, Artis and Brotis. Currently, the price of Artis stands at £50. Looking ahead, the price of Artis next year will be £40 during a recession, £55 in normal economic times, and £60 in an expanding economy. The probabilities associated with recession, normal times, and expansion are 0.1, 0.8, and 0.1, respectively. Artis does not pay dividends and has a correlation of 0.8 with the market. On the other…
Consider the following information on a portfolio of three stocks: Probability of State Stock A Rate of Economy of Return State of Economy Boom Normal Bust .25 .60 15 a. Expected return Variance Standard deviation b. Expected risk premium 0.10 % .04 .09 15 0.00993 Stock B Rate of Return a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return? The variance? The standard deviation? Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., 16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16. 0.10 % % .33 . 13 . 14 b. If the expected T-bill rate is 3.4 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Stock C Rate of Return .55 . 19 -.28
Q.3. The following table gives data on four stocks: Systematic Stock Alpha Variance Unsystematic Variance А 1.1 21.5 40 1.3 16 50 2.3 25 30 0.5 13 45 The market is expected to have a 14% return with a return variance of 16%. Using Sharpe's Single Index Model, calculate the expected return and risk for a portfolio assuming equal proportion of each of the stock. ABCA

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