Your portfolio allocates equal funds to DW Company and Woodpecker, Incorporated. DW Company stock has an annual return mean and standard deviation of 15.5 percent and 44 percent, respectively. Woodpecker stock has an annual return mean and standard deviation of 12.6 percent and 44 percent, respectively. The return correlation between DW and Woodpecker is zero. What is the smallest expected loss for your portfolio in the coming month with a probability of 16 percent? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places. > Answer is complete but not entirely correct. Smallest expected loss -20.43 %

Your portfolio allocates equal funds to DW Company and Woodpecker, Incorporated. DW Company stock has an annual return mean and standard deviation of 15.5 percent and 44 percent, respectively. Woodpecker stock has an annual return mean and standard deviation of 12.6 percent and 44 percent, respectively. The return correlation between DW and Woodpecker is zero. What is the smallest expected loss for your portfolio in the coming month with a probability of 16 percent? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places. > Answer is complete but not entirely correct. Smallest expected loss -20.43 %

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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You have invested 30 percent of your portfolio in Jacob, Inc., 40 percent in Bella Co., and 30 percent in Edward Resources. What is the expected return of your portfolio if Jacob, Bella, and Edward have expected returns of 0.07, 0.13, and 0.09 respectfully?
You manage a risky portfolio containing 25% of Stock A, 32% of Stock B and 43% of Stock C, respectively, with expected rate of return of 18% and standard deviation of 28%. The Tbill rate is 8%. Draw the Capital Allocation Line (CAL) of your portfolio on an expected returnstandard deviation diagram. What is the slope of the CAL? Suppose that the client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 16%. Show the position of your client on your fund’s CAL. What is the proportion y? What are your client’s investment proportions in your three stocks and the T-bill fund?
Assume that the covariance between Stock A and Stock B is -28%^2 (0.0028). Compute the expected rate of return and variance of rate of return of Donald’s portfolio.
You manage a risky portfolio with an expected rate of return of 20% and a standard deviation of 34%. The T-bill rate is 8%. Your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 17%. a. What is the proportion y? (Round your answer to the nearest whole number.) Proportion y 45% 32% 23% T-Bills Stock A Stock B Stock C b. What are your client's investment proportions in your three stocks and the T-bill fund? (Do not round intermediate calculations. Round your answers to 2 decimal places.) % Investment Proportions % % % %
Hyacinth Macaw invests 50% of her funds in stock I and the balance in stock J. The standard deviation of returns on I is 15%, and on J it is 20%. Note: Use decimals, not percents, in your calculations. a. Calculate the variance and standard deviation of portfolio returns, assuming the correlation between the returns is 1. b. Calculate the variance and standard deviation of portfolio returns, assuming the correlation is 0.3. c. Calculate the variance and standard deviation of portfolio returns, assuming the correlation is 0. Note: For all requirements, do not round intermediate calculations. Round your answers to 4 decimal places. a. Variance Standard deviation b. Variance Standard deviation c. Variance Standard deviation
The following is part of the computer output from a regression of monthly returns on Waterworks stock against the S&P 500 index. A hedge fund manager believes that Waterworks is underpriced, with an alpha of 2.1% over the coming month. Beta 1.1 R-square 0.65 a. Suppose you hold an equally weighted portfolio of 100 stocks with the same alpha, beta, and residual standard deviation as Waterworks. Assume the residual returns on each of these stocks are independent of each other. What is the residual standard deviation of the portfolio? (Round your answer to 1 decimal place.) Residual standard deviation Standard Deviation of Residuals 0.13 (1.e., 13% monthly) Probability of a loss b. Calculate the probability of a loss on a market-neutral strategy involving equally weighted, market-hedged positions in the 100 stocks over the next month. Assume the risk-free rate is 0.3% per month. (Do not round intermediate calculations. Enter your answer as percent rounded to 5 decimal places.) % %
None
Your portfolio allocates equal funds to the DW Co. and Woodpecker, Inc. DW Co. stock has an annual return mean and standard deviation of 15 percent and 44 percent, respectively. Woodpecker, Inc., stock has an annual return mean and standard deviation of 11.4 percent and 58 percent, respectively. The return correlation between DW Co. and Woodpecker, Inc., is zero. What is the smallest expected loss for your portfolio in the coming month with a probability of 16 percent? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Smallest expected loss %
The two stocks in your portfolio, X and Y, have independent returns, so the correlation between them, rXY is zero. Your portfolio consists of $50,000 invested in Stock X and $50,000 invested in Stock Y. Both stocks have an expected return of 15%, betas of 1.6, and standard deviations of 30%. Describe your two stocks portfolio by calculating its return and beta. Show your calculations
A mutual fund manager expects her portfolio to earn a rate of return of 10% this year. The beta of her portfolio is 0.5. The rate of return available on risk-free assets is 3% and you expect the rate of return on the market portfolio to be 13%.
Fairmont Enterprises has an expected return of 17%, and Laval News has an expected return of 19%. If you put 70% of your portfolio in Laval and 30% in Fairmont, what is the expected return of your portfolio? *** Expected return on the portfolio is%. (Round to two decimal places.)
Tyler Trucks stock has an annual return mean and standard deviation of 12.5 percent and 46 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 12.0 percent and 46 percent, respectively. Your portfolio allocates equal funds to Tyler Trucks stock and Michael Moped Manufacturing stock. The return correlation between Tyler Trucks and Michael Moped Manufacturing is -.50. What is the smallest expected loss for your portfolio in the coming month with a probability of 1.0 percent? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places. Smallest expected loss %

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