You have the following data on three stocks: Stock Standard Deviation Beta A. 0.15 0.79 0.25 0.61 C 0.20 1.29 if it is to be held in isolation and Stock if it is to be held as As a risk minimizer, you would choose Stock part of a well-diversified portfolio. O A, B. O B, C. O C, A.

You have the following data on three stocks: Stock Standard Deviation Beta A. 0.15 0.79 0.25 0.61 C 0.20 1.29 if it is to be held in isolation and Stock if it is to be held as As a risk minimizer, you would choose Stock part of a well-diversified portfolio. O A, B. O B, C. O C, A.

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

Related questions

Q: a) Share X and Share Y have the following returns with their respective probabilities. Share X Share…

A: Expected return can be found by multiplying the expected returns with the probabilities and then the…

Q: 2. (a) You have a two-asset portfolio that comprises Stock PY and Stock NY with the following…

A: Portfolio standard deviation is the standard deviation of all the different investments in the…

Q: Consider the following information about two stocks (D and E) and two common risk factors (1 and 2)…

A: Fama-French factor models are financial models used to explain and predict stock returns based on…

Q: (Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common…

A: Stock AStock BProbabilityReturnProbabilityReturn0.3513%0.15-6%0.3014%0.357%0.3518%0.3516%0.1520%

Q: You are considering two stocks and have determined the following information: Stock A The return on…

A: Solution: Given, Probability of Stock A (P) Return of Stock A(%) = RA E(RA) = RA*P [RA -…

Q: which of the following stocks are undervalued, overvalued and fairly valued.

A: The return which is expected to be earned by investing in security is known as the Required Rate of…

Q: A portfolio is comprised of equal weights of two stocks labeled Stock X and Stock Y. The covariance…

A: Covariance between stock X and stock Y (CovX,Y) = 0.10 Standard deviation of stock X (SDX) = 0.50…

Q: From the following information, calculate covariance between stocks A and B and expected return and…

A: Correlation between A and B = 0.65 Weight of A in portfolio = 50% Weight of B in portfolio = 50%…

Q: Suppose you have the following two stocks. Stock E(R) 23 34 Suppose also that T-Bills yield 8%. a)…

A: The Capital Market Line (CML) is a fundamental concept in finance that is often used to describe the…

Q: Consider the following stocks with equal probabilities of return: Outcome Return Stock A Return…

Q: Consider the following stocks with equal probabilities of return: Outcome | Return (Stock A) |…

A: The expected return is the return of the portfolio which is the sum of each potential return that is…

Q: ISK AND RETURN: Stock A and Stock B have the following distribution of rates of return: State of the…

A: Market Condition Probability Stock A Return Recession 10% -20% Normal 60% 10% Boom 30% 70%…

Q: Suppose securities A, B, and C have the following expected return and risk.…

A: Stock with lowest coefficient of variance is mean variance dominant stock. coefficient of variance…

Q: The probability distribution of returns for the two stocks X and Y are as follows: Probability 0.1…

Q: How would i do this question?

A: The most general form of expression for the portfolio variance is as shown on the white board. The…

Q: Given the following information, Calculate the (a) expected return and (b) risk (standard deviation)…

A: Stock A's returns: 15% with 20% probability 28% with 15% probability -12% with 15% probability -5%…

Q: A stock's standard deviation determines how the stock affects the riskiness of a diversified…

A: The standard deviation measures total risk and beta measures the market risk. The statement mentions…

Q: (Expected rate of return and risk) Syndex, Inc is considering an investment in one of two common…

A: Risk and return are essential financial principles. The term “risk” refers to the uncertainty and…

Q: 1. Beta is positively related A. the degree of correlation between a stock's return and the market…

A: Risk is a predictable loss or uncertainty that may happen and may not happen. The business owner and…

Q: The table below contains the covariance matrix of stock returns and the market. Assume that the…

A: Risk is the possibility of loss for an organization and risk management is one of the most important…

Q: Consider the following probability distribution for stocks A and B: State Return on Stock A 1 10% 2…

A: Correlation is a statistical measure that is used in finance to estimate the degree to which two…

Q: 0.6 52

A: Risk per unit return of stock is calculated by using a metric coefficient of variation Risk adjusted…

Q: 5. Portfolio Beta Portfolio beta can be computed in the same way as portfolio return was computed.…

A: Beta is used in determining the risk premium to be expected from investment made in a asset because…

Q: . Consider the returns of two shares, A and B, under three possible scenarios: Compute Scenario…

A: In order to calculate the minimum variants we need to first calculate the expected written and…

Q: Calculate the coefficients of variation for the following stocks: Stock Expected return Standard…

A: 1. Calculate the Coefficient of Variation (CV) for Each Stock:The formula for calculating the…

Q: 1. Risk free rate represents: a. The market rate of return b. The rate provided by long term…

A: 1. Risk free rate is the rate which is expected by investor with no risks.

Q: QUESTION 1 Assume the following data for a stock: beta = 0.9; risk-free rate = 4 percent;…

A: According to bartleby guidelines , if multiple questions are asked , then 1st question needs to be…

Q: You are not given the expected return of stock X. The correlation of the returns on the stock X a…

A: Beta of stock shows the risk and volatility related to risk and volatlity related to the overall…

Q: (Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common…

A: Return refers to the profit or loss generated from an investment over a specific period of time. It…

Q: E(R) E(R) E(R) A A B.

A: The most appropriate image that represents the risk and returns characteristics of a portfolio is…

Q: You've gathered the following infomration on stock A and stock B: Beta Volatility Stock 1.5 25% A…

A: Systematic risk is a concept in finance that pertains to the portion of an investment's risk that…

Q: a. Given the information in the table, the expected rate of return for stock A is enter your…

A: Expected Rate of Return = (Probability 1 x Return 1) + (Probability 2 x Return 2) + (Probability 3 x…

Q: b) Suppose that you observe the following information in Table 2 for stocks A and B: Table 2…

A: Single index model: Ri=αi+βiRm+ei Ri=excess return over risk free rate

Q: The following are estimates for two stocks.. Stock Expected Return A B 0.16 0.24 Beta 0.77 1.33…

A: It is given that: Stock Proportion Expected rate Beta Firm specific Std dev A 0.32…

Q: b. Consider the following information about three stocks: Probability of State of Economy 0.40 0.60…

A: Here,SHJSHTSHKState of EconomyProbabilityReturnsReturnsReturnsBoom0.47%28%15%Recession0.613%-5%3%

Q: The interpretation of stock beta coefficient requires an assumption of an average stock which has a…

A: Beta is a measure of a security's systematic risk which cannot be diversified and measures the…

Q: Consider the following probability distribution for stocks A and B: State Probability Return on…

A: the correlation coefficient is approximately 0.47. Explanation: First, we calculate the expected…

Q: Given the following correlation matrix, a risk-averse investor would most likely prefer which of the…

A: Risk averse investor is the one who prefers to avoid loss from the investment. Therefore, these type…

Q: stock’s contribution to the market risk of a well-diversified portfolio is called Q1. ______risk. It…

A: Risk is uncertainty involved and risk may be due to the company or may be due to the overall risk of…

Q: (Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common…

A: Expected rate of return is the rate of return that the investors expect on their investment…

Q: 2. Consider the following expected returns, volatilities, and correlations: Expected Standard Stock…

A: b. Portfolio Volatility with Pital and Mital (assuming information available)Given:Long position in…

Q: You have the following data on three stocks: Stock Standard Deviation Beta A 20% 0.59 B 10% 0.61 C…

A: Stocks refer to the type of ownership to be provided to the stockholders in the company through…

Q: The information regarding the risk level of three different stocks is presented below. 1. Which…

A: Higher beta is not desirable.

Concept explainers

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.

Question

Frage 32
1 Pkte.
You have the following data on three stocks:
Stock
Standard Deviation
Beta
0.15
0.79
0.25
0.61
C.
0.20
1.29
if it is to be held in isolation and Stock
if it is to be held as
As a risk minimizer, you would choose Stock
part of a well-diversified portfolio.
O A; B.
O B; C.
O C, A.
O C, B.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

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 + CA Rg- -2.00 + 1.20RM + eg OM- 26, R-equarea 0.21; R-squaren 0.12 Assume you create portfolio Pwith investment proportions of 0.70 in A and 0.30 in B. a. What is the standard deviation of the portfollo? (Do not round your intermediate calculations. Round your answer to 2 decimal places.) Standard deviation b. What is the beta of your portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places.) Portfolio beta c. What is the firm-specific variance of your portfolio? (Do not round your intermediate calculations. Round your answer to 4 decimal places.) Firm-specific
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:
A stock has a correlation with the market of 0.4. If the Sharpe ratio of the market portfolio is 0.7, what is the Sharpe ratio of the stock? (Hint: algebraically manipulate the SML equation.) 0.28 0.75C. 0.60D. 0.55
i) Calculate the expected return for each stock assuming the Capital Asset Pricing Model (CAPM) is valid, and explain if they are correctly priced. Show your calculations.
27. You have developed the following data on three stocks:Stock Standard Deviation BetaA 0.15 0.79B 0.25 0.61C 0.20 1.29 If you are a risk minimizer, you should choose Stock ____ if it is to be held in isolation and Stock ____ ifit is to be held as part of a well-diversified portfolio.a. A; Ab. A; Bc. B; Ad. C; Ae. C; B
Give the return of the stock in which you would most likely invest and show the preferred order of the stocks if you were considering further investment, all other things being equal. Stock Beta Risk-Free Market-Rate CA-K 0.95 5.5% 9% AU-L 1.05 6% 8.5% TT-M 1.10 5% 8%
Please do stepwise and correct please ill like.. pls correct
You have the following data on three stocks: If you are a strict risk minimizer, you would choose Stock if it is to be held in isolation, and Stock a well-diversified portfolio. Stock Standard Deviation Beta if it is to be held as part of X 8% 1.35 Y 10% 1.05 Z 12% 0.75 ○ X; X O Z; Z O X; Z O Z; X Y; Y
Baghiben
Problem 2: You are given the following probability distribution for a stock: Pr. Outcome 4 -4% .6 12% A. Compute the expected return B. Compute the standard deviation C. Presuming the stock returns are normally distributed, what do these results indicate?

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