Chapter 14, Problem 5P

Using the data in the following table,, consider a portfolio that maintains a 50% weight on stock A and a 50% weight on stock B a. What is the return each year of this portfolio? b. Based on your results from part (a), compute the average return and volatility of the portfolio. c. Show that (i) the average return of the portfolio is equal to the (weighted) average of the average returns of the two stocks, and (ii) the volatility of the portfolio equals the same result as from the calculation in Eq. 11.8. d. Explain why the portfolio has a lower volatility than the average volatility of the two stocks. a. What is the return each year of this portfolio? Enter the return of this portfolio for each year in the table below (Round to two decimal places.) Year Portfolio Data table 2010 % 2011 % 2012 % 2013 % (Click on the following icon in order to copy its contents into a spreadsheet.) 2014 2015 %1 1% Year 2010 2011 2012 2013 2014 2015 Stock A -10% 20% 5% 5% 2% 9% Stock B 21% 7% 30% -3% 8%…

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)

Using the data in the following​ table, LOADING... ​, consider a portfolio that maintains a   75% weight on stock A and a   25% weight on stock B. a. What is the return each year of this​ portfolio? b. Based on your results from part ​(a​), compute the average return and volatility of the portfolio. c. Show that​ (i) the average return of the portfolio is equal to the​ (weighted) average of the average returns of the two​ stocks, and​ (ii) the volatility of the portfolio equals the same result as from the calculation in Eq. 11.9. d. Explain why the portfolio has a lower volatility than the average volatility of the two stocks.       Question content area bottom Part 1 a. What is the return each year of this​ portfolio?   Enter the return of this portfolio for each year in the table​ below: ​ (Round to two decimal​ places.)   Year 2010 2011 2012 2013 2014 2015 Portfolio enter your response here​% enter your response here​% enter your response…

A person is interested in constructing a portfolio. Two stocks are being considered. Letx = percent return for an investment in stock 1, and y = percent return for an investment instock 2. The expected return and variance for stock 1 are e(x) = 8.45% and Var(x) = 25.The expected return and variance for stock 2 are e(y) = 3.20% and Var(y) = 1. Thecovariance between the returns is sxy = −3.a. what is the standard deviation for an investment in stock 1 and for an investment instock 2? Using the standard deviation as a measure of risk, which of these stocks isthe riskier investment?

The following portfolios are being considered for investment. During the period under consideration, RFR = 0.07.Portfolio             Return                  Beta                 σiA                           0.15                    1.0                 0.05B                           0.20                    1.5                 0.10C                           0.10                    0.6                 0.03D                           0.17                   1.1                  0.06Market                  0.13                   1.0                  0.04 a. Compute the Sharpe measure for each portfolio and the market portfolio. b. Compute the Treynor measure for each portfolio and the market portfolio.  c. Rank the portfolios using each measure, explaining the cause for any differences you find in the rankings.

A portfolio management organization analyzes 60 stocks and constructs a mean-variance efficient portfolio using only these 60 securities.a. How many estimates of expected returns, variances, and covariances are needed to optimize this portfolio?b. If one could safely assume that stock market returns closely resemble a single-index structure, how many estimates would be needed?

You have formed a portfolio of five securities. The portfolio weights and betas of the individual securities are as follows:                                 Security                                wi                             βi                                                       1                                       .55                          1.5                                       2                                       .25                          0.2                                       3                                       .15                         -0.5                                       4                                       .30                          0.5                                       5                                                                      0.8   What would be the beta of this portfolio?

The risk-free rate is 3 percent. Also, the expected return on the market portfolio is 10.5 percent.a. Calculate the expected return of your portfolio. (Hint: The expected return of a portfolio equals the weighted average of the individual stocks" expected returns, where the weights are the percentage invested in each stock.)b. Calculate the portfolio beta.c. Given the preceding information, plot the security market line on paper. Plot the stocks from your portfolio on your graph.d. From your plot in part c, which stocks appear to be your winners, and which ones appear to be your losers?e. Why should you consider your conclusion in part d to be less than certain?

Consider an investment portfolio that consists of three different stocks, with the amount invested in each asset shownbelow. Assume the risk-free rate is 2.5% and the market risk premium is 6%. Use this information to answer thefollowing questions.Stock Weights BetasChesapeake Energy 25% 0.8Sodastream 50% 1.3Pentair 25% 1.0a) Compute the expected return for each stock using the CAPM and assuming that the stocks are all fairly priced.b) Compute the portfolio beta and the expected return on the portfolio.c) Now assume that the portfolio only includes 50% invested in Pentair and 50% invested in Sodastream (i.e., a twoassetportfolio). The yearly-return standard deviation of Pentair is 48% and the yearly-return standard deviation ofSodastream is 60%. The correlation coefficent between Pentair’s returns and Sodastream’s returns is 0.3 What is theexpected yearly-return standard deviation for this portfolio?