Suppose that the average stock has a volatility of 49%, and that the correlation between pairs of stocks is 19%. Estimate the volatility of an equally weighted portfolio with: a. 1 stock b. 30 stocks c. 1,000 stocks a. The volatility of an equally weighted portfolio with 1 stock is 49 %. (Round to two decimal places.) b. The volatility of an equally weighted portfolio with 30 stocks is %. (Round to two decimal places.)

Suppose that the average stock has a volatility of 49%, and that the correlation between pairs of stocks is 19%. Estimate the volatility of an equally weighted portfolio with: a. 1 stock b. 30 stocks c. 1,000 stocks a. The volatility of an equally weighted portfolio with 1 stock is 49 %. (Round to two decimal places.) b. The volatility of an equally weighted portfolio with 30 stocks is %. (Round to two decimal places.)

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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2. Consider a portfolio of three stocks. The weights of the three stocks are 0.2, 0.3, and 0.5. The betas of the three stocks are 1, 1.5, and 2. The beta of the portfolio is A. 1.55 B. 1.65 C. 1.75 D. 1.70
Given: E(R1) = 0.13 E(R2) = 0.19 E(01) = 0.03 E(02) = 0.04 Calculate the expected returns and expected standard deviations of a two-stock portfolio in which Stock 1 has a weight of 40 percent under the conditions given below. Do not round intermediate calculations. Round your answers for the expected returns of a two-stock portfolio to three decimal places and answers for expected standard deviations of a two-stock portfolio to four decimal places. a. 1,2=1.00 Expected return of a two-stock portfolio: 0.1280 0.0280 Expected standard deviation of a two-stock portfolio: b. 1,2 = 0.80 Expected return of a two-stock portfolio: 0.1280 0.0266 Expected standard deviation of a two-stock portfolio: C. 1,2 0.20 Expected return of a two-stock portfolio: Expected standard deviation of a two-stock portfolio: d. 1,2 = 0.00 Expected return of a two-stock portfolio: Expected standard deviation of a two-stock portfolio: e. 1,2 = -0.20 Expected return of a two-stock portfolio: Expected standard…
The stock market can have three potential returns with the following probabilities. Note "otherwise" is whatever probability it takes for all three probabilities to sum to one. So, if the first two probabilities are each .30, then "otherwise" represents a probability of .40. Probability Return -0.04 0.24 0.38 otherwise 0.00 0.18 What is the stock market's standard deviation? Enter your answer in decimal form, and show 4 decimal places.
You own a portfolio that has $1,331 invested in Stock A and $2,857 invested in Stock B. If the expected returns on these stocks are 0.08 and -0.01, respectively, what is the expected return on the portfolio? Enter the answer with 4 decimals (e.g. 0.1234).
You own a portfolio that has $5,758 invested in Stock A and $1,616 invested in Stock B. If the expected returns on these stocks are -0.12 and 0.24, respectively, what is the expected return on the portfolio? Enter the answer with 4 decimals (e.g. 0.1234).
Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock C splits two-for-one in the last period. A B с Po 81 41 82 Rate of return 20 100 200 200 Divisor P1₁ 86 36 92 21 100 200 200 Required: a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t= 1). (Do not round intermediate calculations. Round your answer to 2 decimal places.) % P2 86 36 46 Q2 100 200 400 b. What will be the divisor for the price-weighted index in year 2? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
A portfolio is invested 22 percent in Stock G, 26 percent in Stock J, with remainder in Stock K. The expected returns on these stocks are 8.58 percent, 11.55 percent, and 13.05 percent, respectively. What is the portfolio's expected return? Answer to two decimals.
A portfolio is invested 24 percent in Stock G, 39 percent in Stock J, and 37 percent in Stock K. The expected returns on these stocks are 10.5 percent, 13 percent, and 18 percent, respectively. What is the portfolio's expected return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
6
Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock C splits two-for-one in the last period. A B C Po 82 42 84 Rate of return 00 100 Divisor 200 200 P1 87 37 94 01 100 200 200 % P2 87 Required: a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t= 1). (Do not round intermediate calculations. Round your answer to 2 decimal places.) 370 47 92 100 200 400 b. What will be the divisor for the price-weighted index in year 2? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. Calculate the rate of return of the price-weighted index for the second period (t=1 to t=2).
Consider a portfolio consisting of the following three stocks: an expected return of 8%. The risk-free rate is 3%. a. Compute the beta and expected return of each stock. ▪ The volatility of the market portfolio is 10% and it has b. Using your answer from part a, calculate the expected return of the portfolio. c. What is the beta of the portfolio? d. Using your answer from part c, calculate the expected return of the portfolio and verify that it matches your answer to part b.
You own a portfolio that has $2,045 invested in Stock A and $4,096 invested in Stock B. If the expected returns on these stocks are 14 percent and 8 percent, respectively, what is the expected return (in percent) on the portfolio? Answer to two decimals.

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