The variance of BMI, Inc. is estimated to be 0.0158 while the variance of QBU, Inc. is estimated to be 0.0259. The covariance between BMI and QBU is estimated to be 0.0025. What is the variance of a two stock portfolio if 0.35 of your money is placed in BIMI, and 0.65 of your money is placed in QBU. Portfolio Variance =________ Submit your answer using at least four decimal places of accuracy and work your analysis using at least 4 decimal places of accuracy. Place your answer as a decimal and not as a percentage (for example, as 1111 and not as 11.11%).

The variance of BMI, Inc. is estimated to be 0.0158 while the variance of QBU, Inc. is estimated to be 0.0259. The covariance between BMI and QBU is estimated to be 0.0025. What is the variance of a two stock portfolio if 0.35 of your money is placed in BIMI, and 0.65 of your money is placed in QBU. Portfolio Variance =________ Submit your answer using at least four decimal places of accuracy and work your analysis using at least 4 decimal places of accuracy. Place your answer as a decimal and not as a percentage (for example, as 1111 and not as 11.11%).

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 6P: The market and Stock J have the following probability distributions: a. Calculate the expected rates...

See similar textbooks

Similar questions

Calculate the correlation coefficient for the portfolio using the following information: Variance of Stock X 0.08 Variance of Stock Y 0.06 Covariance is 0.05 a. 0.1042 b. 0.7217 c. 0.00024 d. 0.0693
Suppose the index model for stocks A and B is estimated with the following results:rA = 2% + 0.8RM + eA, rB = 2% + 1.2RM + eB , σM = 20%, and RM = rM − rf . The regressionR2 of stocks A and B is 0.40 and 0.30, respectively.(a) What is the variance of each stock? (b) What is the firm-specific risk of each stock? (c) What is the covariance between the two stocks?
The variance (risk) of an N-asset portfolio can be written as: o² = 2 + 2/11 -Cov where o² is the average variance of stocks in the portfolio and Cov is the average covariance between each pair of stocks in the portfolio. This result suggests that a well-diversified portfolio with a sufficiently large number of stocks will have O a zero total risk (variance) a zero covariance with other assets a zero diversifiable (nonsystematic) risk a zero market (systematic) risk
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.
The variance of X is 0.36. The standard deviation of Y is 0.38. The correlation between the two is 0.01. What is the variance of a portfolio that invests -62.59% in X and the rest in Y? Note: Type -9 if the answer does not make sense.
A portfolio is comprised of equal weights of two stocks labeled Stock X and Stock Y. The covariance between Stock X and Stock Y is 0.10. The standard deviation of Stock X is 0.50, and the standard deviation of Stock Y is 0.50. Which of the following comes closest to the variance of the portfolio? Select one: a. 0.60 b. 1.00 c. 0.42 d. 0.18 e. 0.55
3. Consider two stocks A and B with expected returns of 6% (stock A) and 8% (stock B). The matrix of variances and covariances is presented below: Stock A В A 0.0064 -0.008 B -0.008 0.01 a. Write the variance of the portfolio composed of A and B as a function of the proportion x invested in stock A. (1-x) is invested in B. Short sales are not allowed on the market. b. Write the variance of the portfolio composed of A and B as a function of the portfolio's expected return. c. What are the proportions invested in the minimum risk portfolio composed of A and B? d. Draw the graph of the portfolios combining A and B in a (V, E) space. V=variance, E=expected return. e. If the standard deviation of the pf is 7% what proportions were invested in A and B?
In this question, you will be asked to calculate the variance/risk of a portfolio consisting of two assets. Consider a portfolio that only consists of asset E and asset B. E has weight of 60%, and B has weight of 40%. The variance of E is about 13%, and the variance of B is about 4%. The covariance between E and B is about 0.2. What is the variance of this portfolio? 0.1492 O 0.1012 0.19 0.094
A stock's beta coefficient can be calculated using the following equation: B₁ = Oi, m σε m a. Write a user-defined function that can calculate the beta coefficient. The argu- ments to the function should be the covariance between the stock and market returns, and the variance of the market's returns. For example, BETA (COVAR AS SINGLE, MARKET VAR AS SINGLE). b. Rewrite your function so that it accepts ranges of returns and then calcu- lates the beta directly from the returns. It should be defined as: BETA(STOCK- RETURNS AS RANGE, MARKETRETURNS AS RANGE). Your function should make use of Application. WorksheetFunction to calculate the covariance and variance (use Excel's COVAR.S and VAR.S functions). In the code, be sure to check to see if the number of stock returns is equal to the number of market returns. The function should return an error if the count of returns is not equal.
the variance of stock A is .004, the variance of the market .007 and the covariance between the two is .0026. what is the correlation coefficient?
The following are estimates for a stock A. Stock Expected ret. beta firm-specific variance, or Var(e) A 0.15 1.3 0.34 The market index has a standard deviation of 0.22, and the risk-free rate is 0.03 What percentage of stock A's total risk is attributable to systematic risk (or market risk)? Here consider variance as the risk measure. Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.
A person is interested in constructing a portfolio. Two stocks are being considered. Letx = percent return for an investment in stock 1, and y = percent return for an investment instock 2. The expected return and variance for stock 1 are e(x) = 8.45% and Var(x) = 25.The expected return and variance for stock 2 are e(y) = 3.20% and Var(y) = 1. Thecovariance between the returns is sxy = −3.a. what is the standard deviation for an investment in stock 1 and for an investment instock 2? Using the standard deviation as a measure of risk, which of these stocks isthe riskier investment?