Geometric average returns on the basis of time for portfolio. Introduction: Average return is calculated as internal return rate. The IRR is the discount rate at which the present value is zero for all cash flow.

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Answer 1

Question

Chapter 24, Problem 7PS

A

Summary Introduction

To calculate: Geometric average returns on the basis of time for portfolio.

Introduction: Average return is calculated as internal return rate. The IRR is the discount rate at which the present value is zero for all cash flow.

B

Summary Introduction

To calculate: The arithmetic average returns for portfolio.

Introduction: Arithmetic return is average of all the returns. Average of returns is sum of all returns divided by the number of years.

C

Summary Introduction

To calculate: Dollar-weighted return for this portfolio.

Introduction: The dollar-weighted return is calculated by the internal return rate.

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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%…

Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an asset's expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence. Consider the following case: David owns a two-stock portfolio that invests in Falcon Freight Company (FF) and Pheasant Pharmaceuticals (PP). Three-quarters of David's portfolio value consists of FF's shares, and the balance consists of PP's shares. Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Probability of Occurrence Falcon Freight Pheasant Pharmaceuticals 0.20 0.35 0.45 Strong Normal Weak 40% 24% -32% 56% 32% -40% Calculate expected returns for…

Consider a world that only consists of the three stocks shown in the following table: a. Calculate the total value of all shares outstanding currently. b. What fraction of the total value outstanding does each stock make up? c. You hold the market portfolio, that is, you have picked portfolio weights equal to the answer to part b with each stock's weight is equal to its contribution to the fraction of the total value of all stocks. What is the expected return of your portfolio?

Answer 2

Question

Chapter 24, Problem 7PS

A

Summary Introduction

To calculate: Geometric average returns on the basis of time for portfolio.

Introduction: Average return is calculated as internal return rate. The IRR is the discount rate at which the present value is zero for all cash flow.

B

Summary Introduction

To calculate: The arithmetic average returns for portfolio.

Introduction: Arithmetic return is average of all the returns. Average of returns is sum of all returns divided by the number of years.

C

Summary Introduction

To calculate: Dollar-weighted return for this portfolio.

Introduction: The dollar-weighted return is calculated by the internal return rate.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 24, Problem 7PS

A

Summary Introduction

To calculate: Geometric average returns on the basis of time for portfolio.

Introduction: Average return is calculated as internal return rate. The IRR is the discount rate at which the present value is zero for all cash flow.

B

Summary Introduction

To calculate: The arithmetic average returns for portfolio.

Introduction: Arithmetic return is average of all the returns. Average of returns is sum of all returns divided by the number of years.

C

Summary Introduction

To calculate: Dollar-weighted return for this portfolio.

Introduction: The dollar-weighted return is calculated by the internal return rate.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 24, Problem 7PS

A

Summary Introduction

To calculate: Geometric average returns on the basis of time for portfolio.

Introduction: Average return is calculated as internal return rate. The IRR is the discount rate at which the present value is zero for all cash flow.

B

Summary Introduction

To calculate: The arithmetic average returns for portfolio.

Introduction: Arithmetic return is average of all the returns. Average of returns is sum of all returns divided by the number of years.

C

Summary Introduction

To calculate: Dollar-weighted return for this portfolio.

Introduction: The dollar-weighted return is calculated by the internal return rate.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 24, Problem 7PS

A

Summary Introduction

To calculate: Geometric average returns on the basis of time for portfolio.

Introduction: Average return is calculated as internal return rate. The IRR is the discount rate at which the present value is zero for all cash flow.

B

Summary Introduction

To calculate: The arithmetic average returns for portfolio.

Introduction: Arithmetic return is average of all the returns. Average of returns is sum of all returns divided by the number of years.

C

Summary Introduction

To calculate: Dollar-weighted return for this portfolio.

Introduction: The dollar-weighted return is calculated by the internal return rate.

Answer 6

Chapter 24, Problem 7PS

A

Summary Introduction

To calculate: Geometric average returns on the basis of time for portfolio.

Introduction: Average return is calculated as internal return rate. The IRR is the discount rate at which the present value is zero for all cash flow.

Answer 7

Chapter 24, Problem 7PS

A

Summary Introduction

To calculate: Geometric average returns on the basis of time for portfolio.

Introduction: Average return is calculated as internal return rate. The IRR is the discount rate at which the present value is zero for all cash flow.

Answer 8

B

Summary Introduction

To calculate: The arithmetic average returns for portfolio.

Introduction: Arithmetic return is average of all the returns. Average of returns is sum of all returns divided by the number of years.

Answer 9

B

Summary Introduction

To calculate: The arithmetic average returns for portfolio.

Introduction: Arithmetic return is average of all the returns. Average of returns is sum of all returns divided by the number of years.

Answer 10

C

Summary Introduction

To calculate: Dollar-weighted return for this portfolio.

Introduction: The dollar-weighted return is calculated by the internal return rate.

Answer 11

C

Summary Introduction

To calculate: Dollar-weighted return for this portfolio.

Introduction: The dollar-weighted return is calculated by the internal return rate.

Answer 12

Expert Solution & Answer

Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 24 - Prob. 1PS Ch. 24 - Prob. 2PS Ch. 24 - Prob. 3PS Ch. 24 - Prob. 4PS Ch. 24 - Prob. 5PS Ch. 24 - Prob. 6PS Ch. 24 - Prob. 7PS Ch. 24 - Prob. 8PS Ch. 24 - Prob. 9PS Ch. 24 - Prob. 10PS

Geometric average returns on the basis of time for portfolio. Introduction: Average return is calculated as internal return rate. The IRR is the discount rate at which the present value is zero for all cash flow.

Solution Summary: The author explains how to calculate the geometric average returns on the basis of time for portfolio.

Videos

To calculate: Geometric average returns on the basis of time for portfolio.

Introduction: Average return is calculated as internal return rate. The IRR is the discount rate at which the present value is zero for all cash flow.

To calculate: The arithmetic average returns for portfolio.

Introduction: Arithmetic return is average of all the returns. Average of returns is sum of all returns divided by the number of years.

To calculate: Dollar-weighted return for this portfolio.

Introduction: The dollar-weighted return is calculated by the internal return rate.

Want to see the full answer?

Chapter 24 Solutions

Geometric average returns on the basis of time for portfolio. Introduction: Average return is calculated as internal return rate. The IRR is the discount rate at which the present value is zero for all cash flow.

Solution Summary: The author explains how to calculate the geometric average returns on the basis of time for portfolio.

Videos

To calculate: Geometric average returns on the basis of time for portfolio. Introduction: Average return is calculated as internal return rate. The IRR is the discount rate at which the present value is zero for all cash flow.

To calculate: The arithmetic average returns for portfolio. Introduction: Arithmetic return is average of all the returns. Average of returns is sum of all returns divided by the number of years.

To calculate: Dollar-weighted return for this portfolio. Introduction: The dollar-weighted return is calculated by the internal return rate.

Want to see the full answer?

Chapter 24 Solutions

To calculate: Geometric average returns on the basis of time for portfolio.

Introduction: Average return is calculated as internal return rate. The IRR is the discount rate at which the present value is zero for all cash flow.

To calculate: The arithmetic average returns for portfolio.

Introduction: Arithmetic return is average of all the returns. Average of returns is sum of all returns divided by the number of years.

To calculate: Dollar-weighted return for this portfolio.

Introduction: The dollar-weighted return is calculated by the internal return rate.