Suppose you invest 70% of your fund in stock A and the other 30% in stock B. If stock A and B are expected to have the following returns next year, then what are the standard deviations for Stock A, Stock B and the portfolio returns respectively? State of Economy Recession Boom 9.60%; 11.6% 0.6006 4.00€ Probability 2 .8 Stock A -9% 18% Stock B 1% 3%

Suppose you invest 70% of your fund in stock A and the other 30% in stock B. If stock A and B are expected to have the following returns next year, then what are the standard deviations for Stock A, Stock B and the portfolio returns respectively? State of Economy Recession Boom 9.60%; 11.6% 0.6006 4.00€ Probability 2 .8 Stock A -9% 18% Stock B 1% 3%

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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Similar questions

Consider the following scenario analysis: Scenario Recession Normal economy Boom Rate of Return Probability Stocks Bonds 0.20 -6% 18% 0.50 19% 11% 0.30 26% 8% a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? b. Calculate the expected rate of return and standard deviation for each investment. c. Which investment would you prefer? Complete this question by entering your answers in the tabs below. Required A Required B Required C Which investment would you prefer? Stock Bond Which investment would you prefer? < Required B more risk-averse less risk-averse risk-neutral
Please answer all parts
Use the following information to calculate your company's expected return. State Probability Return Boom 20% 0.42 Normal 60% 0.13 Recession 20% -0.19 Round to two decimal places.
Given the following information, what is the expected return on a portfolio that is invested 30 percent in both Stocks A and C, and 40 percent in Stock B? State of economy probability A B C Boom 0.05 7.80% 23.60% 18.40 % Normal 0.85 9.10% 15.40 % 13.70% Recession 0.1 11.80% -12.30% 6.40 % Weight of Stocks 30% 40% 30% Please show your work.
Question 3 You are trying to develop a strategy for investing in two different stocks. The anticipated annual return for a ¢1,000 investment in each stock under four different economic conditions has the following probability distribution: Returns Probability Economic Condition Stock X Stock Y 0.1 Recession -50 -100 0.3 Slow Growth 20 50 0.4 Moderate Growth 100 130 0.2 Fast Growth 150 200 (a) Which of the investments has a better return and why? (b) Which of the investments is relatively less risky and why? (c) What type of association exists between the two-investment options X and Y? Interpret your results.
Suppose that an investor has a chance of investing 90% fund in A with the remainder 10% purchasing shares in B. The returns on these companies respond differently to the general activity within the economy. Calculate the expected returns and standard deviation for this two-asset profolio. Event i State of thye economy Probability Pi Return on A RA Return on B RB Boom 0.3 20% 3% Growth 0.4 10% 35% Recession 0.3 0% -5%
Consider the following bond portfolio: Coupon Bond Value Maturity Yield A $300 million 3 years 0% 10% В 300 4 6. 10 400 8 10 a) What is the bond portfolio's duration? b) Calculate the capital loss on this portfolio if the yield increases from 10 to 12 percent. c) Suppose the portfolio is to be immunized over an investment horizon of approximately 5.19 years. Determine the market value of the immunized portfolio at the end of 5.19 years. 4.
ASAP
Currently, the risk-free return is 4 percent, and the expected market rate of return is 11 percent. What is the expected return of the following three-stock portfolio? Amount Invested Beta $200,000 0.7 $300,00 1.2 $500,000 2.2
What is the most you should be willing to pay for the stock in the table? Expected Expected Price in 1Dividend in 1 year Required Current Return Price Year $376.29 $3.91 5.80% $89.00
Could part 2 be answered
The investment funds for your company includes the following: Stock $ Amount Invested Beta for Each Stock A $ 600,000 .8 B $ 1,800,000 1.4 C $ 2,400,000 1.7 D $ 700,000 -.6 E $ 3,000,000 1.1 You need to calculate the required rate of return for the investment. The market’s required return for Year 2020 is 12% and the risk free rate is 3% Show your work on the following: Calculate the average beta for the portfolio. Calculate the required rate of return for the entire portfolio. The CFO of your company is anticipating that the stock market will be decreasing in the near future. Please give a recommendation on which stock the company should sell and which stock the company should buy. The CFO also wants you to explain your answer.

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