Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 38+0.7RM + ©A RB = -28 + 1.2RM + eB OM 20%; R-squareд = 0.20; R-squareg 0.12 What is the standard deviation of each stock? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Stock A Stock B Standard Deviation % %

Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 38+0.7RM + ©A RB = -28 + 1.2RM + eB OM 20%; R-squareд = 0.20; R-squareg 0.12 What is the standard deviation of each stock? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Stock A Stock B Standard Deviation % %

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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The index model for stocks A and B is estimated from excess return with the following results: RA = -0.01 +0.8RM RB = 0.04 + 1.1RM R-squared 4 = 0.15 R-squared B = 0.3 Market-index risk (oM) is 0.2
Based on the following information, calculate the expected return of Stock A: State of the Economy Probability of State Occurring Stock A Expected Return Recession 13. 0.20 0.052 Normal 0.50 0.080 Boom 0.30 0.139 Enter your answer as a decimal with a leading zero and 4 places of precision (i.e. 0.1234)
Consider the three stocks in the following table. P, represents the price at time t, and Q, represents the total shares outstanding at time t. Calculate the rate of return on a price-weighted index of three stocks for the first period (t=0 to t=1). Table 2: Data for Q4 & Q5 Q0 P1 Q1 PO 100 50 105 50 A B 200 100 210 100 C 300 100 250 100
S Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3.6% + 1.20RM + eA RB = -1.6% + 1.5RM + eB OM = 16%; R-squareд = 0.25; R-squareg = 0.15 What is the standard deviation of each stock? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Stock A Stock B Standard Deviation % %
Given the following information, determine the beta coefficient for Stock L that is consistent with equilibrium: = 8%; rRF = 3%; IM = 12%. Round your answer to two decimal places.
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…
What is the expected return of Stock A given the information below about its returns across future states of nature? Enter return in decimal form, rounded to 4th digit, as in "0.1234
Suppose you are given the following information about 2 stocks, what weight would you invest in stock A (with the rest going into stock B) to maximize the Sharpe Ratio? E(RA)=16% E(RB)=8% σA=22% σB=12% σA,B=−0.003696 rf=3% Enter weight in decimal form, rounded to 4th digit, as in "0.1234"
Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (10 %) (34 %) 0.2 4 0 0.4 14 23 0.2 18 28 0.1 30 39 Calculate the expected rate of return, , for Stock B ( = 12.00%.) Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the standard deviation of expected returns, σA, for Stock A (σB = 20.05%.) Do not round intermediate calculations. Round your answer to two decimal places. % Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. Assume the risk-free rate is 3.5%. What are the Sharpe ratios for Stocks A and B? Do not round intermediate calculations. Round your answers to four decimal places. Stock A: Stock B:
The index model has been estimated using historical excess return data for stocks A, B, and C, with the following results: RA = 0.02 + 0.9RM + eA RB = 0.04 + 1.2RM + eB RC = 0.10 + 1.ORM + eC OM oM = 0.22 o(eA) = 0.21 o(eB ) = 0.11 o(eC ) = 0.23 a. What are the standard deviations of stocks A, B, and C? b. Break down the variances of stocks A, B, and C into their systematic and firm-specific components. c. What is the covariance between the returns on each pair of stocks? d. What is the covariance between each stock and the market index?
Consider a market value-weighted index consisting of 3 stocks: A, B, and C. The stocks' prices at time 0 (p0) and time 1 (p1) are given below, along with the number of shares outstanding. Calculate the index levels at time 0. Round your answer to 4 decimal places. For example, if your answer is 3.205%, then please write down 0.0321. stock p0 p1 outstanding shares 43 45 200 69 50 500 11 12 600 A B C
Consider the following Information: Stock Return if Market Return Is: Stock -12% 12% 12 14 C D Stock A B -12 -32 11 20 What is the beta of each of the stocks? (Leave no cells blank - be certain to enter "0" wherever required. Use decimals, not percents, in your calculations. A negative value should be indicated by a minus sign. Round your answers to 1 decimal place.) D E 22 15 Beta

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