The following are estimates for two stocks. Stock A B Expected Return 0.16 0.19 Beta 0.84 1.23 firm-specific Standard Deviation 0.27 0.38 The market index has a standard deviation of 0.21 and the risk-free rate is 0.03. Suppose that we were to construct a portfolio with proportions: Stock A 0.34 Stock B 0.44 The remaining proportion is invested in Tbills Compute the standard deviation of the portfolio. Round your answer to 4 decimal places. For example if your answer is 3.205 %, then please write down 0.0321.

The following are estimates for two stocks. Stock A B Expected Return 0.16 0.19 Beta 0.84 1.23 firm-specific Standard Deviation 0.27 0.38 The market index has a standard deviation of 0.21 and the risk-free rate is 0.03. Suppose that we were to construct a portfolio with proportions: Stock A 0.34 Stock B 0.44 The remaining proportion is invested in Tbills Compute the standard deviation of the portfolio. Round your answer to 4 decimal places. For example if your answer is 3.205 %, then please write down 0.0321.

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

See similar textbooks

Similar questions

Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 2.60% + 0.90RM + eA RB = -2.00% + 1.20RM + eB OM = 26%; R-squarea = 0.21; R-squareg = 0.12 Assume you create portfolio P with investment proportions of 0.70 in A and 0.30 in B.
Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rƒ. The characteristics of two of the stocks are as follows: Stock Expected Return Standard Deviation A 8% 55% B 4% 45% Correlation = −1 Required: a. Calculate the expected rate of return on this risk-free portfolio? (Hint: Can a particular stock portfolio be formed to create a “synthetic” risk-free asset?) (Round your answer to 2 decimal places.) b. Could the equilibrium rƒ be greater than rate of return?
Expected return of a portfolio using beta. The beta of four stocks-P, Q, R, and S-are 0.59, 0.89, 1.05, and 1.31, respectively and the beta of portfolio 1 is 0.96, the beta of portfolio 2 is 0.87, and the beta of portfolio 3 is 1.05. What are the expected returns of each of the four individual assets and the three portfolios if the current SML is plotted with an intercept of 4.5% (risk-free rate) and a market premium of 12.0% (slope of the line)? ..... What is the expected return of stock P? % (Round to two decimal places.)
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio Y Z Market Risk-free Rp 16.00% бр 32.00% 15.00 27.00 7.30 17.00 11.30 5.80 22.00 0 Bp 1.90 1.25 0.75 1.00 0 Assume that the tracking error of Portfolio X is 13.40 percent. What is the information ratio for Portfolio X? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places. Information ratio
E(FAssume that using the Security Market Line (SML) the required rate of return (RA) on stock A is found to be half of the required return (Rs) on stock B. The risk-free rate (R;) is one-fourth of the required return on A. Return on market portfolio is denoted by RM. Find the ratio of beta of A (BA) to beta of B (BB). a o
Consider two types of assets: market portfolio (M) and stock A. The expected return is 8% and standard deviation of the market portfolio is 15%. The risk-free rate is 2%. The standard deviation of market portfolio returns is 15%. The standard deviation of stock A is 30%, and the beta coefficient is 1. Draw the capital market line and show the position of stock A.
The following are estimates for two stocks. Firm- Specific Expected Standard Stock Return Beta Deviation A 14% 0.90 30% B 21 1.40 42 The market index has a standard deviation of 20% and the risk-free rate is 7%. Required: a. What are the standard deviations of stocks A and B? b. Suppose that we were to construct a portfolio with proportions: Stock A Stock B T-bills 0.30 0.45 0.25 Compute the expected return, beta, nonsystematic standard deviation, and standard deviation of the portfolio.
The index model for stock A has been estimated with the following result: RA = 0.01 + 0.9RM + eA. If σM = 0.25 and R2A = 0.25, the standard deviation of return of stock A is:
Consider the following information on a portfolio of three stocks: State of Economy Probability of State of Economy Stock A Rate of Return Stock B Rate of Return Stock C Rate of Return Boom.13.02.32.50 Normal.55.10.22.20 Bust .32.16.21.35 If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance, and the standard deviation? Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., 16161. Enter your other answers as a percent rounded to 2 decimal places, e. g., 32.16. If the expected T-bill rate is 4.25 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.
You are analyzing a stock that has a beta of 1.3 and a standard deviation of 12.0%. The risk-free rate is 4.2% and you estimate the expected return on the market portfolio to be 11.1%. What return do you expect this stock to have? The expected return according to CAPM is: OA. 13.2% B. 14.3% OC. 19.8% OD. 18.6% OE 12.0% OF. 14.4% OG. 9.8% OH. 8.7% OL 9.0%
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio Rp op Bp X 14.0% 31% 1.35 Y 13.0 26 1.10 Z 7.0 14 .75 Market 10.2 19 1.00 Risk-free 6.0 0 0 What are the Sharpe ratio, Treynor ratio, and Jensen's alpha for each portfolio? (A negative value should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your ratio answers to 5 decimal places. Enter your alpha answers as a percent rounded to 2 decimal places.) Sharpe Ratio Treynor Ratio Jensen's Alpha Portfolio X % Y % Z % Market %
Give typing answer with explanation and conclusion

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS