![Section 2 (15 Marks) [CLO 2] Short exercises Exercise 1: Calculate the expected return of the folwingprlios (6 Marks) Portfolio Aipha tfolios: (6 Marks) Probability Expected security Security 1 Security 2 Security3 Security4 Security 5 0.2 0.15 0.35 0.25 0.05 return 0.13 0.56 0.78 0.26 0.82 Porttolio Beta Probability Expected security return 0.13 Security1 Security 2 Security3 Security 4 Security 5 0.2 0.1 0.3 0.2 0.2 0.56 0.78 0.26 0.82 Portfolio Zeba Probability Expected security return Security 1 Security 2 Security 3 Security 4 Security 5 0.2 0.1 0.25 0.25 0.2 0.13 0.56 0.78 0.26 0.82](http://img.homeworklib.com/questions/9aefe1c0-7327-11ea-87fa-bdd7b2b06dbf.png?x-oss-process=image/resize,w_560)
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Section 2 (15 Marks) [CLO 2] Short exercises Exercise 1: Calculate the expected return of the...
Using the same economic data, you have been asked to recommend the divestment of one of...
Using the same economic data, you have been asked to recommend the divestment of one of the SBUs and purchase of Company D with expected returns of Boom 18%, Normal 10%, Decline 2%. The % of portfolio for the new investment would be the same as the one sold. Which company do you suggest selling? What will be the portfolio return now? Scenario Probability Return A Return B Return C Boom 0.2 0.2 0.3 0.45 Normal 0.6 0.12 0.13...
2. Please comment the following statement (30 marks) 1) The expected return of zero beta security...
2. Please comment the following statement (30 marks) 1) The expected return of zero beta security is smaller than risk free rate. (5 marks) 2) According to CAPM, the higher the variance, the higher the expected return. (5 marks) 3) As diversification increases, the systematic risk of a portfolio approaches zero. (5 marks) 4) Analysts may use regression analysis to estimate the index model for a stock. When doing so, the slope of the regression line is an estimate of...
Please answer in detail. (calculator steps if possible) Question 5 (1 point) What is the expected return of a...
Please answer in detail. (calculator steps if possible)
Question 5 (1 point) What is the expected return of a portfolio that has 70% in Asset A and 30% in Asset B? Probability Asset A Asset B State of Rate of of State of Rate of Economy Economy Return Return Boom 0.3 0.13 0.08 Normal 0.5 0.05 0.06 Recession 0.2 -0.05 -0.01
Show transcribed image text Question 5 (1 point) What is the expected return of a portfolio that has 70%...
Please answer both questions. Will Rate!! An automobile service facility specializing the next car to be...
Please answer both questions. Will Rate!!
An automobile service facility specializing the next car to be tuned engine tune-ups knows that 50 % of all tune-ups are done on four-cylinder automobiles, 35% on six-cylinder automobiles, and 15% on eight-cylinder automobiles. Let J the number of cylinders (a) What is the pmf of X7 P(x) line araph for the pmf of part (a). (b) Draw Probability Probability 0.5 0.45 0.4 035 0.3 0.5 045 0.4 О35 0.3 0.25 0.25 0.2 0.2...
1. What is the EXPECTED RETURN for Asset A and B? 2.What is the STANDARD DEVIATION for Asset A and B? State...
1. What is the EXPECTED RETURN for Asset A and B?
2.What is the STANDARD DEVIATION for Asset A and B?
State of Economy Probability Asset A of State of Rate of Economy Return 0.3 0.13 0.5 0.06 0.2 -0.05 Asset B Rate of Return 0.08 0.05 -0.01 Boom Normal Recession
Show transcribed image text State of Economy Probability Asset A of State of Rate of Economy Return 0.3 0.13 0.5 0.06 0.2 -0.05 Asset B Rate of Return 0.08...
Problem #5 (12 Marks) You have a portfolio with a standard deviation of 30% and an...
Problem #5 (12 Marks) You have a portfolio with a standard deviation of 30% and an expected return of 18%. You are considering adding one of the two stocks in the table below to your portfolio. After adding the stock, you will have 20% of your money in the new stock and 80% of your money in your existing portfolio. A) Calculate the risk and return of a new portfolio with 20% invested in stock A and 80% in your...
Problem 2 Intro We know the following expected returns for stocks A and B.glven different states...
Problem 2 Intro We know the following expected returns for stocks A and B.glven different states of the economy: 0.04 State (s) Probability E(ra) Ers,s) Recession 0.2 -0.1 Normal 0.5 0.08 0.05 Expansion 0.3 0.18 0.07 - Attempt 1/5 for 10 pts. Part 1 What is the expected return for stock A? 3+ decimals Submit Attempt 175 for 10 pts. Part 2 What is the expected return for stock B? Submit Problem 9 Intro You have $100,000 to invest and...
question 2 Examples on Asset Pricing Mode 1. You are given the following equilibrium expected returns...
question 2
Examples on Asset Pricing Mode 1. You are given the following equilibrium expected returns and risks 7 (R- es-2 E(RA)- 12.2 % ; E(Ra)-15.5 % ; Ba-1.25 BA-0.7; .£{{¢*6,4 *రి 6 a What is the equation of the Security Market Line? b. A portfolio, made up of A (above) and another security, has a beta of 1.10 and expected return of 13 %. Which one would you rather buy- A alone or the portfolio? Why? (R) 4-6 7...
The scores on the verbal section of a certain graduate school entrance exam have a mean...
The scores on the verbal section of a certain graduate school entrance exam have a mean of 153 and a standard deviation of 8.7. Scores on the quantitative section of the exam have a mean of 154 and a standard deviation of 8.9. Assume the scores are normally distributed. Students intending to study engineering in graduate school have a mean score of 178 on the quantitative section and a mean score of 156 on the verbal section. a. Find the...
please answer question #1 7 1. You are given the following equilibrium expected returns and risks...
please answer question #1
7 1. You are given the following equilibrium expected returns and risks E(R) - 12.2%; E(Re) - 15.5% BA -0.7; Be-1.25. c( 0.460.0615 a. What is the equation of the Security Market Line? b. A portfolio, made up of A (above) and another security, has a beta of 1.10 and expected return of 13%. Which one would you rather buy - A alone or the portfolio? Why? Ee19. 6 - OVAL BYA c. Given the SML...
2. Please comment the following statement (30 marks) 1) The expected return of zero beta security is smaller than risk free rate. (5 marks) 2) According to CAPM, the higher the variance, the higher the expected return. (5 marks) 3) As diversification increases, the systematic risk of a portfolio approaches zero. (5 marks) 4) Analysts may use regression analysis to estimate the index model for a stock. When doing so, the slope of the regression line is an estimate of...
Please answer in detail. (calculator steps if possible)
Question 5 (1 point) What is the expected return of a portfolio that has 70% in Asset A and 30% in Asset B? Probability Asset A Asset B State of Rate of of State of Rate of Economy Economy Return Return Boom 0.3 0.13 0.08 Normal 0.5 0.05 0.06 Recession 0.2 -0.05 -0.01
Show transcribed image text Question 5 (1 point) What is the expected return of a portfolio that has 70%...
Please answer both questions. Will Rate!!
An automobile service facility specializing the next car to be tuned engine tune-ups knows that 50 % of all tune-ups are done on four-cylinder automobiles, 35% on six-cylinder automobiles, and 15% on eight-cylinder automobiles. Let J the number of cylinders (a) What is the pmf of X7 P(x) line araph for the pmf of part (a). (b) Draw Probability Probability 0.5 0.45 0.4 035 0.3 0.5 045 0.4 О35 0.3 0.25 0.25 0.2 0.2...
1. What is the EXPECTED RETURN for Asset A and B?
2.What is the STANDARD DEVIATION for Asset A and B?
State of Economy Probability Asset A of State of Rate of Economy Return 0.3 0.13 0.5 0.06 0.2 -0.05 Asset B Rate of Return 0.08 0.05 -0.01 Boom Normal Recession
Show transcribed image text State of Economy Probability Asset A of State of Rate of Economy Return 0.3 0.13 0.5 0.06 0.2 -0.05 Asset B Rate of Return 0.08...
Problem #5 (12 Marks) You have a portfolio with a standard deviation of 30% and an expected return of 18%. You are considering adding one of the two stocks in the table below to your portfolio. After adding the stock, you will have 20% of your money in the new stock and 80% of your money in your existing portfolio. A) Calculate the risk and return of a new portfolio with 20% invested in stock A and 80% in your...
Problem 2 Intro We know the following expected returns for stocks A and B.glven different states of the economy: 0.04 State (s) Probability E(ra) Ers,s) Recession 0.2 -0.1 Normal 0.5 0.08 0.05 Expansion 0.3 0.18 0.07 - Attempt 1/5 for 10 pts. Part 1 What is the expected return for stock A? 3+ decimals Submit Attempt 175 for 10 pts. Part 2 What is the expected return for stock B? Submit Problem 9 Intro You have $100,000 to invest and...
question 2
Examples on Asset Pricing Mode 1. You are given the following equilibrium expected returns and risks 7 (R- es-2 E(RA)- 12.2 % ; E(Ra)-15.5 % ; Ba-1.25 BA-0.7; .£{{¢*6,4 *రి 6 a What is the equation of the Security Market Line? b. A portfolio, made up of A (above) and another security, has a beta of 1.10 and expected return of 13 %. Which one would you rather buy- A alone or the portfolio? Why? (R) 4-6 7...
please answer question #1
7 1. You are given the following equilibrium expected returns and risks E(R) - 12.2%; E(Re) - 15.5% BA -0.7; Be-1.25. c( 0.460.0615 a. What is the equation of the Security Market Line? b. A portfolio, made up of A (above) and another security, has a beta of 1.10 and expected return of 13%. Which one would you rather buy - A alone or the portfolio? Why? Ee19. 6 - OVAL BYA c. Given the SML...
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