You have the following rates of return for a risky portfolio for several recent years. Assume that the stock pays no dividends. Year Beginning of Year Price # of Shares Bought or Sold 2016 $50.00 100 bought 50 bought 75 sold 2017 $55.00 2018 $51.00 2019 $ 54.00 75 sold What is the geometric average return for the period? Multiple Choice 2.87% 2.60% 0.74% 2.21%

You have the following rates of return for a risky portfolio for several recent years. Assume that the stock pays no dividends. Year Beginning of Year Price # of Shares Bought or Sold 2016 $50.00 100 bought 50 bought 75 sold 2017 $55.00 2018 $51.00 2019 $ 54.00 75 sold What is the geometric average return for the period? Multiple Choice 2.87% 2.60% 0.74% 2.21%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 17P

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You have the following rates of return for a risky portfolio for several recent years. Assume that the stock pays no dividends. Year Beginning of Year Price # of Shares Bought or Sold 2016 $ 50.00 100 bought 2017 $ 55.00 50 bought 2018 $ 51.00 75 sold 2019 $ 54.00 75 sold What is the dollar-weighted return over the entire time period? Multiple Choice 0.74% 2.87% 2.6% 2.21%
You have the following rates of return for a risky portfolio for several recent years. Assume that the stock pays no dividends. Year 2016 2017 2018 2019 3.92% 1.94% What is the geometric average return for the period? 2.60% Beginning of Year Price $50 $55 $51 $54 5.21% # of Shares Bought or Sold 150 bought 100 bought 125 sold 125 sold
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a) Consider these three stock returns with the following annualised characteristics: Stock A Stock B Stock C Expected Return 16% 10% 3% Stock A Stock B Stock C Standard deviation 26% 22% 11% Stock A 1 0.4 0.2 According to the Capital Asset Pricing Model (CAPM), which stock is a better buy, when the market's expected return is 8%, and risk-free rate is 4%? What is the alpha of each stock? Plot the Security Market Line (SML) and each stock's risk-return point on one graph. b) Now suppose that the same stock returns have the following correlation matrix: Beta Stock B 1.5 1.1 0.3 1 0.3 Stock C 1 Weights 55% 35% 10% If we form a three-stock portfolio by investing 55%, 35% and 10% in Stock A, B and C, respectively, what is the expected return and variance of this portfolio?