Please correct answer and don't used hand raiting Stock A's expected return for next year is 8% with a standard deviation of 25%. Stock B'sexpected return is 12% with a standard deviation of 35%. The risk-free rate is 4%. Thecorrelation coefficient between the two stocks' returns is 0.37. You have 60% of your money instock A and the rest in stock B. What's the standard deviation of portfolio returns?

Step 1: List the given values. We have two stocks, A and B, with the following information: Stock…

Answered: Stock A's expected return for next year…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 14P

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Similar questions

You have observed the following returns over time: Assume that the risk-free rate is 6% and the market risk premium is 5%. What are the betas of Stocks X and Y? What are the required rates of return on Stocks X and Y? What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y?
Consider the following probability distribution for stocks C and D: State Probability Return on Stock C Return on Stock D 1 0.30 7 % − 9 % 2 0.50 11 % 14 % 3 0.20 − 16 % 26 % If you invest 25% of your money in C and 75% in D, what would be your portfolio's expected rate of return and standard deviation?
Assume that the CAPM holds. Stock ABC has the expected return of ABC = volatility of σABC = 28%. It has a market beta of BABC The expected return on the market portfolio is TM σM = 30%. = = 0.6. 7.4% per year and return 12%, and the return volatility of the market portfolio is The annual risk-free rate is rf = 5%. Compute the CAPM alpha of ABC. % Compute the volatility of the idiosyncratic component of return of ABC. %
Suppose the risk-free return is 4.2% and the market portfolio has an expected return of 11.4% and a standard deviation of 16%. Johnson & Johnson Corporation stock has a beta of 0.30. What is its expected return? The expected return is %. (Round to two decimal places.)
The expected return for a stock, calculated using the CAP M is 10.5%. The market free return is 9.5% and the beta of the stock is 1.50. Calculate the implied risk-free rate.
Suppose that the risk - free rate of return is 5%, and the expected rate of return on the market portfolio (with a beta of 1) is 14%. In addition, investors forecast a rate of return of 15% for Stock X, and of 17% for Stock Y. The two stocks have a standard deviation and beta as indicated in the Table below. Stocks Standard Deviation Beta X 36 % 0.8 Y 25 % 1.5 a. Calculate the fair expected rate of return and the alpha for each stock.
You are creating a portfolio of two stocks. The first one has a standard deviation of 20% and the second one has a standard deviation of 50%. The correlation coefficient between the returns of the two is 0.2. You will invest 70% of the portfolio in the first stock and the rest in the second stock. What will be the standard deviation of this portfolio's returns? Answer in percent, rounded to one decimal place (e.g., 4.32%=4.3).
The risk-free rate is 3.7 percent and the expected return on the market is 12.3 percent. Stock A has a beta of 1.1 and an expected return of 13.1 percent. Stock B has a beta of .86 and an expected return of 11.4 percent. Are these stocks correctly priced?
The risk-free rate is 6.8 percent, and stock A has an expected return of 15.8 percent. What is the beta of stock A?
Stock Y has a beta of 1.40 and an expected return of 19%. Stock Z has a beta of 0.65 and an expected return of 10.5%. The market risk premium is 8.8%. The risk-free rate is 6%, are these stocks correctly priced? Show your argument for each stock. Hint: first find the expected return using CAPM for each stock.
Stock Y has an expected excess return of 10% and its beta is 1.25. The Market portfolio expected return is 8% and the risk - free rate is 2%. What is the alpha of Stock Y?
what is the expected return and should you buy it?

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