Three portfolios are created using shares of Stock A and Stock B. The table below provides the proportional value of the two stocks in each portfolio, as well as the volatility of each portfolio. Find the correlation between the returns of Stock A and Stock B. Proportion of A Proportion of Volatility Portfolio 1 20% 80% 42.65% Portfolio 2 |40% 60% 36.89% Portfolio 3 70% 30% 30.10% 45.4% 55.0% 40.6% 50.2% 59.7%

Three portfolios are created using shares of Stock A and Stock B. The table below provides the proportional value of the two stocks in each portfolio, as well as the volatility of each portfolio. Find the correlation between the returns of Stock A and Stock B. Proportion of A Proportion of Volatility Portfolio 1 20% 80% 42.65% Portfolio 2 |40% 60% 36.89% Portfolio 3 70% 30% 30.10% 45.4% 55.0% 40.6% 50.2% 59.7%

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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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.)
9. A portfolio is composed of two stocks, Stock A and B. The standard deviation of return for Stock A is 50% and for Stock B it is 40%. If the covariance between the returns for Stock A and Stock B is -0.04, compute the correlation coefficient between the returns for Stock A and Stock B.
What is the beta stock of each stock and the beta portfolio of the two stocks using the percentages allocated to each (50%-50%, 75%-25%, 25%-75%)
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.
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. Stock A B C Po 90 45 80 90 425 450 650 a. Rate of return b. New divisor c. Rate of return P1 95 40 90 91 425 450 650 % P2 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). Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. Calculate the new divisor for the price-weighted index in year 2. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. Calculate the rate of return for the second period (t=1 to t = 2). Note: Round your answer to 2 decimal places. % 92 425 450 95 40 45 1,300
A portfolio has 380 shares of Stock A that sell for $59.15 per share and 278 shares of Stock B that sell for $83.07 per share. What is the portfolio weight of Stock A? Enter the answer in 4 decimals (e.g. 0.3044).
1. The following table presents the expected returns of three stocks and the risk free rate. в 4% Stock A 8% Expected return What is the expected return and risk on an equally weighted portfolio composed of these four assets? The standard deviation of stock A is 10% and the covariance between A and B equals 0.0045. The correlation matrix between A, B and C is: 14% 4% Correl B A 1 0.3 0.7 B 0.3 0.5 0.5 Combining stocks A and C in a portfolio in equal proportions will result in a variance of 1.95%. 0.7
5. Assume a portfolio compose of stocks and bonds. You were given the following relevant to the stocks and bonds: Stock Bond Covariance Stock 300 80 Bond 100 Solve for the portfolio variance and standard deviation given portfolio weights of 0.5 for both stocks and bonds.
Consider the three stocks in the following table. Pt represents price at time t, Qt represents shares outstanding at time t. Stock C splits two for one in the second period from t=1 to t=2. Calculate the rate of return on a price-weighted index consisting of the three stocks for the first period from t=0 to t=1. Answer in percentage. Answer options: 0.00% 2.49% 6.06% 8.95% 1.30%
Portfolio theory with three assets Estimated covariances between three stocks are shown in the following table. The expected returns for the three stocks are 11% (A), 9% (B) and 4% (C), respectively A B C A 0.0225 0.0030 -0.0009 B 0.0030 0.0100 -0.0012 -0.0009 -0.0012 0.0036 Note: All returns and covariance matrix are on an annual basis A) Calculate the expected return and standard deviation of the portfolio if it is equally split between A and B B) Calculate the expected return and standard deviation of the portfolio if it is equally split between A,B and C C) Compare the portfolio in answer (a) and the portfolio in answer (b) using the sharpe ratio. Assuming the current annual risk-free rate is 3%
USE THE FOLLOWING DATA FOR QUESTIONS 4-6: A portfolio is equally invested in Stock A, Stock B, Stock C, and Treasury Bills (25% each). The expected returns of each of these holdings is 4.8%, 11.2%, 18.6%, and 3.0%, respectively. The Betas for each of the stocks is as follows: A 0.4, B 1.8, and C 2.6. Q6: Based on your answers to questions 4 and 5, assuming an expected return of the market of 8.5%, should you invest in this portfolio from a risk/reward perspective? Multiple Choice O O Yes No
Suppose you are given the following information about 2 stocks, what is the Sharpe Ratio of a portfolio weighted 55% in stock A and 45% in stock B? E(RA)=16% E(RB)=8% σA=22% σB=12% σA,B=−0.003696 rf=3% Enter rate in decimal form, rounded to 4th digit, as in "0.1234"

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