You decide to invest in a portfolio consisting of 26 percent Stock A, 49 percent Stock B, and the remainder in Stock C. Based on the followinginformation, what is the variance of your portfolio?State ofEconomyRecessionNormalBoomProbabilityof StateEconomy.116.669.215Multiple ChoiceReturn if State OccursStock B-3.70%Stock A-10.30%9.60%21.59%10.70%25.19%Stock C-12.70%17.10%29.89%

First, we need to determine the return of the portfolio using the formula below for each state of…

Answered: You decide to invest in a portfolio…

You decide to invest in a portfolio consisting of 26 percent Stock A, 49 percent Stock B, and the remainder in Stock C. Based on the following information, what is the variance of your portfolio?

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

Your portfolio invests in the stock of two companies. Company A’s stock has a variance of 0.25, while Company B’s stock has a standard deviation of 0.30. The correlation between the two stocks is 0.40. If 30% of your portfolio is invested in Company A, and 70% in Company B, what is the standard deviation of your portfolio? A. 28.74% B. 24.96% C. 30.30% D. 28.50%
Consider two stocks, Stock D, with an expected return of 13 percent and a standard deviation of 28 percent, and Stock I, an international company, with an expected return of 16 percent and a standard deviation of 38 percent. The correlation between the two stocks is -0.1. What is the weight of stock D in the minimum variance portfolio?
Assume that the following data available for the portfolio, calculate the expected return, variance and standard deviation of the portfolio given stock A accounts for 45% and stock B accounts for 55% of your portfolio? (4 marks) A B Expected return 12.5% 18.5% Standard Deviation of return 15% 20% Correlation of coefficient (p) 0.4
On the expected return (Y-axis) vs. variance (X-axis) graph, investors will prefer portfolios that lie to the: 1) Southeast 2) Northeast 3) Northwest 4) Southwest
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
The standard deviation of a portfolio is simply the weighted average of the standard deviations for the individual assets within the portfolio. Group of answer choices True False
Your employer has asked you to investigate the firm’s portfolio risk and return. The portfolio comprises three stocks. It is invested 50 percent in stock A, 30 percent in stock B and 20 percent in stock C. You gathered the following information: a) Determine what is the portfolio’s expected return b) Determine the portfolio’s variance and standard deviation c) Assume that the expected risk-free rate is 2.75 percent. Determine the expected risk premium on the portfolio.
A portfolio management organization analyzes 72 stocks and constructs a mean-variance efficient portfolio that is constrained to these 72 stocks. How many estimates of expected returns, variances and covariances are needed to optimize this portfolio? (Using Markowitz Model)

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