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%

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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Assume you have created a 2-stock portfolio by investing $30,000 in stock X with a beta of 0.8, and $70,000 in stock Y with a beta of 1.2. Market risk premium is 8% and risk-free rate is 6%. The followings are the probability distributions of Stocks X and Y’s future returns: State of Economy Probability rx rY Recession 0.1 -10% -35% Below average 0.2 2% 0% Average 0.4 12% 20% Above average 0.2 20% 25% Boom 0.1 38% 45% Calculate the portfolio’s expected rate of return and the standard deviation of its future returns Calculate the required rate of return of your portfolio. Which stock in…
Required: Investors expect the market rate of return this year to be 19.00%. The expected rate of return on a stock with a beta of 1.2 is currently 22.80%. If the market return this year turns out to be 17.60%, how would you revise your expectation of the rate of return on the stock? (Do not round intermediate calculations. Round your answer to 1 decimal place.) Revised rate of return %
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Listed below are the annual rates of return earned on Stock X, Stock Yand Stock Z over the past 6 years.Year Stock X Stock Y Stock Z2014 20% 16% 0%2015 15% 17% -2%2016 -10% 15% 1%2017 30% 11% 0%2018 25% 5% 1%2019 14% -25% 1%As risk-adverse investor, what portfolio would you choose? Here are the options:Stock X only, Stock Y only, Stock Z only, a 50/50 split portfolio made of X & Y,or a 90/10 split portfolio made of X & Y. Show your calculations and support yourchoice.
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