Xuemeihas been managing five portfolios for the last year. She has collected the following information and has begun to make several calculations for five two stock portfolios: 1 2 3 4 5 a) rate of return on NCP = 12% rate of return on NAB = 10% standard deviation of NCP = 15% standard deviation of NAB = 19% covariance = 0.0064 Portfolio Weight in NAB Portfolio Returns 30% 40% 60% 55% 20% Portfolio Variance Portfolio Standard Deviation 3 Assist Xuemei by finishing the calculations for her. That is, complete the missing figures in the table above.

Xuemeihas been managing five portfolios for the last year. She has collected the following information and has begun to make several calculations for five two stock portfolios: 1 2 3 4 5 a) rate of return on NCP = 12% rate of return on NAB = 10% standard deviation of NCP = 15% standard deviation of NAB = 19% covariance = 0.0064 Portfolio Weight in NAB Portfolio Returns 30% 40% 60% 55% 20% Portfolio Variance Portfolio Standard Deviation 3 Assist Xuemei by finishing the calculations for her. That is, complete the missing figures in the table above.

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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Ahmed observed the following data of two stocks as shown in the below table. Which stock do you advise Ahmed to select according to the required rate of return? And explain why? Stock A Stock B Market Standard Deviation Return 30% 30% 22% Correlation Coefficient between A & M -30% Correlation Coefficient between B & M 30% Expected Market Return 11% Risk-Free rate of return 5%
Jamie Wong is thinking of building an investment portfolio containing two stocks, L and M. Stock L will represent 40% of the dollar value of the portfolio, and stock M will account for the other 60%. The historical returns over the next 6 years, 2013-2018 for each of these stocks are shown in the following table: 2013 16% 22% 2014 17% 21% 2015 19% 20% 2016 21% 19% 2017 22% 18% 2018 23% 17% a. Calculate the actual portfolio return, r Subscript p for each of the 6 years. b. Calculate the expected value of portfolio returns, r overbar Subscript p " over the 6-year period. C. Calculate the standard deviation of expected portfolio returns, sigma Subscript r Sub Subscript p " over the 6-year period. d. How would you characterize the correlation of returns of the two stocks L and M? e. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio.
You are an analyst for a large public pension fund and you have been assigned the task of evaluating two different external portfolio managers (Yellen and Zagami) who (actively) manage two funds which are considering. Your associates have assembled the following historical average return, standard deviation, and CAPM beta estimates for these two fund managers over the past five years. In addition, you have estimated that the risk premium for the market portfolio is 5.12% and the risk-free rate is currently 4.14%. What is Ms. Yellen's average "alpha" for the period. Report your answer in percentage format rounded to three decimal places. (For example.1234 should be entered as "12.3"). Fund Manager Actual Avg. Return Standard Deviation Ms. Yellen 11% Mr. Zagami 8.24% Answer: 11.07 8.75% Beta 1.18 0.9
You have recently received $400,000 and you are considering investing $250,000 in the WIG and the remainder in TJH. Your analysis of each stock revealed the following information. The Expected Returns of both companies are 8% and 6% respectively and the Standard Deviations are 7% and 9% respectively. The correlation between the companies is 0.5. i. Compute the expected return of the portfolio ii. Compute the standard deviation of the portfolio iii. Given the results and any other computations, you deem relevant fromthe information presented, explain whether a rational risk-averse investor would prefer to invest in the suggested portfolio or 100% in WIG or 100% in TJH
Your portfolio had the values in the following table for the four years listed: Data table (Click on the icon here in order to copy its contents of the data table below into a spreadsheet.) Beginning Value Ending Value 2016 $59,462 $55,536 2017 55,536 64,852 2018 64,852 67,183 2019 67,183 70,997 . a. Calculate your return for each year over the 4-year period. Then calculate the average return over the 4-year period. b. Calculate the portfolio standard deviation. Question content area bottom Part 1 The return for 2016 is enter your response here%. (Round to two decimal places.)
An investment portfolio has equal proportions invested in five stocks.The expected returns and standard deviations (both in percent per year) are (8, 3),(5, 2), (12, 8), (7, 9), (14, 15). What are average return and standard deviation forthis portfolio?
A portfolio analyst has been asked to allocate investment funds among three different stocks. The relevant data for the stocks is shown in the following table. If the goal is to maximize return while maintaining risk within acceptable bounds (in this case, a portfolio standard deviation of no more than 20%), find the proper allocation of the funds to each stock. Return Risk (Standard Deviation Stock (R) A 20% to S) 25% Pair of Stocks Joint Risk (Covariance) A to B 0.05 B 10% 12% A to C 0.075 C 15% 10% B to C -0.05 ces What proportion of the portfolio should be allocated to stock]B?
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Consider the following six months of returns for two stocks and a portfolio of those two stocks: (Click the icon to view the monthly returns.) Note: The portfolio is composed of 50% of Stock A and 50% of Stock B. a. What is the expected return and standard deviation of returns for each of the two stocks? b. What is the expected return and standard deviation of returns for the portfolio? c. Is the portfolio more or less risky than the two stocks? Why? a. What is the expected return and standard deviation of returns for each of the two stocks? The expected return of Stock A is 0%. (Round to one decimal place.) The expected return of Stock B is 1%. (Round to one decimal place.) The standard deviation of Stock A is 0.04195. (Round to five decimal places.) (Round to five decimal places.) The standard deviation of Stock B is Monthly Returns Stock A Stock B Portfolio Jan 1% 0% 0.5% Feb 4% - 3% 0.5% D Mar -7% 8% ..... 0.5% Apr 2% - 1% 0.5% May - 3% 4% 0.5% Jun 3% - 2% 0.5% WOCHE X ans
Big Rock has several investment portfolios with a local mutual fund company. One of the company's directors asked you to assess the performance of five of the portfolios. Portfolio Return Beta Standard Deviation Risk Free Rate A 12.5% 1.2 4% 3% C 10% 1.2 5% 4% E 3% 0.8 6% 6% Required: Calculate the Sharpe measure and the Treynor measure for each portfolio. a. What is the Sharpe measure of: i. Portfolio A? ii. Portfolio C? iii. Portfolio E? b. What is the Treynor measure of: i. Portfolio A? ii. Portfolio C? iii. Portfolio E?
Hyacinth Macaw invests 68% of her funds in stock I and the balance in stock J. The standard deviation of returns on I is 13%, and on J it is 20%. (Use decimals, not percents, in your calculations.) Calculate the variance of portfolio returns, assuming the correlation between the returns is 1. (Do not round intermediate calculations. Round your answer to 4 decimal places.) Calculate the variance of portfolio returns, assuming the correlation is 0.5. (Do not round intermediate calculations. Round your answer to 4 decimal places.) Calculate the variance of portfolio returns, assuming the correlation is 0. (Do not round intermediate calculations. Round your answer to 4 decimal places.)
Elsi is a risk-averse investor. She has invested 60% of her investment in share A and all the remainder in share B. Below are projections for the shares as well as the market. A В Market Expected return (%) Standard deviation (%) 10 30 20 40 70 30 Correlations A 1 0.2 1 Market 0.3 0.68 1. Required: a) What are the expected return and standard deviation of returns on the portfolio? b) The correlation between A and B is expected to be -1, what proportion should Elsi invest in A in order to form a minimum variance portfolio? Assume that she will invest only in A and B. c) Elsi is wondering if beta is a more appropriate risk measure for the shares. Explain when beta is a more appropriate measure of risk than standard deviation. d) Calculate the beta of A and B. Construct a portfolio for Elsi. The portfolio will consist of shares A and B and have the same level of systematic risk as the market. e) i) What will be the expected return and standard deviation of returns on the portfolio? ii)…

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