State Probability 0.10 0.20 0.20 0.30 0.20 L23 45 Return on Stock A Multiple Choice 10% 13% 12% 14% 15% Return on Stock B 8% 7% 6% 9% 8% Which of the following portfolio(s) is(are) on the efficient frontier? The portfolio with 15 percent in A and 85 percent in B. The portfolio with 26 percent in A and 74 percent in The portfolio with 10 percent in A and 90 percent in B. The portfolio with 20 percent in A and 80 percent in B.

State Probability 0.10 0.20 0.20 0.30 0.20 L23 45 Return on Stock A Multiple Choice 10% 13% 12% 14% 15% Return on Stock B 8% 7% 6% 9% 8% Which of the following portfolio(s) is(are) on the efficient frontier? The portfolio with 15 percent in A and 85 percent in B. The portfolio with 26 percent in A and 74 percent in The portfolio with 10 percent in A and 90 percent in B. The portfolio with 20 percent in A and 80 percent in B.

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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Qn4: Assume a two-stock portfolio created with $50,000 is invested in both HT and Collections. The expected returns are given below: Calculate the portfolio's return for each state of economy and fill them in the last column, under "Portfolio" (Hint: The portfolio's expected return is a weighted average of the returns of the portfolio's component assets). Calculate the portfolio's expected return (Hint: You have to incorporate the probability distribution of each state of economy). Calculate the portfolio's standard deviation. Economy Recession Below average Average Above average Boom Prob. HT 0.1 -27.0% 0.2 -7.0% 0.4 15.0% 0.2 30.0% 0.1 45.0% Coll 27.0% 13.0% 0.0% -11.0% -21.0% Portfolio
Pick the best answer to the following portfolio? (Round off all numbers to 2 decimal places) Stock Amount Invested Beta A $6,700 1.16 B 3,000 1.23 C 8,500 0.79 Group of answer choices The portfolio has more systematic risk than the market. The portfolio has more total risk than the market. The portfolio has no systematic risk. The portfolio has same systematic risk as the market. The portfolio has less systematic risk than the market.
2. Consider stocks A and B with the following monthly returns: Stock 1 2 3 4 A -2% 3% 1% 6% 4% B 1% -2% 4% 5% 3% a. What is the expected return and risk of a portfolio composed of 30% A and 70% B? b. What is the contribution of each stock to portfolio's return and risk? c. What is the structure of the minimum risk portfolio? Compute its expected return and risk.
Question 1: Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. Stock A Stock B Stock C 1. Calculate the client expected return on the complete portfolio 2. Calculate the reward-to-variability ratio (Sharpe ratio): Part B A three-asset portfolio has the following characteristics: Expected Return Asset X Y Z 15% 10 6 Standard Deviation What is the expected return on this three-asset portfolio? 27% 33% 40% 22% 8 3 Weight 0.50 0.40 0.10
Consider the following simplified APT model: Factor Expected Risk Premium Market 6.4% Interest Rate -0.6% Yield Spread 5.1% Factor Risk Exposures Market Interest Rate Yield Spread Stock Stock(b1) (b2) (b3) P 1.0 -2.0 -0.2 P2 1.2 0 0.3 P3 0.3 0.5 1.0 Required: 1. Calculate the expected return for the above stocks. Assume risk free rate is 5%. Consider a portfolio with equal investments in stocks P, P2 and P3 2.What are the factor risk exposures for the portfolio? 3.What is the portfolio’s expected return?
Accounting Use the following information: Stock A B Good state 12% 17% Bad state 0% -1% Assume there is 60% probability that the good state occurs and 40% chance the bad state occurs. What is the expected return of a portfolio that is 9% invested in stock A and 1-9% invested in B? (Please use 5 decimal places, this should be written in percentage return, so an answer of 23.143% should be written at .23143)
What is the required return for each stock? What is required return for stock B? Scenario Probability Stock A Stock B Market Risk-free rate Bust 0.25 -0.15 -0.05 Normal 0.55 0.2 0.1 Boom 0.2 0.4 0.3 Beta 1.2 0.9 Expected return 0.13 0.05
Suppose securities A, B, and C have the following expected return and risk. Stock Expected return Risk A 8% 6% B 7% 9% C 13% 9% What is the coefficient of variation for stock A?
4.3% 3.38 LON LIN 2.ON Portfolio Opportunity Set ADN Min Risk ORP KOOS GOOG AMIN D. All portfolios from "Min.Risk" to "ORP" E. All portfolios from "Min. Risk" to AMZN 10.00% COON St Dav 6. On the graph above, which portfolio(s) would be considered to be efficient? A. Only portfolio AMZN B. Only portfolio ORP C. All portfolios from ORP to AMZN SEAN
5 What is the expected return on a portfolio that is invested 22 percent in Stock A, 36 percent in Stock B, and the remainder in Stock C? State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Stock C Boom .05 .18 .11 .13 Normal .92 .09 .08 .06 Bust .03 -.07 -.05 -.14 Print Multiple Choice 7.06% 7.38% 6.99% 7.18% 6.84%
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: 8p 1.70 1.30 0.85 1.00 Portfolio X Y Z Market Risk-free Rp 11.5% 10.5 7.2 10.9 4.6 R-squared op 38.00% 33.00 23.00 28.00 0 Assume that the correlation of returns on Portfolio Y to returns on the market is 0.76. What percentage of Portfolio Y's return is driven by the market? Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places.
Consider the following stock return scenarios for three stocks: Stock Stock A B Economy Up Average Down 8% 5% 0% 2% 3% 4% Stock с 12% 0% -5% If each state of the economy is equally likely, calculate the expected return and population standard deviation for a portfolio invested entirely in Stock A. Which stock should be added to the portfolio to reduce risk?

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