Homework Answers
Expected Return of the stock :
Based on Standard Deviation- A,B,C,D ( Since allocation is not given hence the return basis on high risk high return logic)
Based on Beta - D,B,A,C (Return is multiply with the Beta factor, hence the high factor will give high return)
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2. Given the information below, sort the stocks in the order of the expected return you...
using the stocks from above question 3 Stock A o (in %) 20 B 0.5 3....
using the stocks from above question 3
Stock A o (in %) 20 B 0.5 3. The risk-free rate is 0% and the expected return on the market is 10%. You are given the same stocks as in Q 2. Assuming, as in Q 2(b), that you hold the stock as part of a well-diversified portfolio, which stocks would you buy if the expected return on the stocks were as below: Stock Expected return in % MOA co 2. Given...
3. The risk-free rate is 0% and the expected return on the market is 10%. You...
3. The risk-free rate is 0% and the expected return on the market is 10%. You are given the same stocks as in Q 2. Assuming, as in Q 2(b), that you hold the stock as part of a well-diversified portfolio, which stocks would you buy if the expected return on the stocks were as below: Stock Expected return in % Stock o (in %) 20 B 0.5 D 5 2
The projected rate of return on stocks A and B are 13% and 18%, respectively. Their...
The projected rate of return on stocks A and B are 13% and 18%, respectively. Their standard deviations are 11% and 9% respectively. Stock A has beta of 0.5 and Stock B has beta of 1.5. The T-bill rate and the expected rate of return on the S&P/TSX index are 6% and 16%,respectively. If you currently hold a well-diversified passive index portfolio, would you buy any of the two stocks? If yes, which one?
If a well-diversified portfolio of stocks has an expected return of 15% when the expected return on the market portfolio...
If a well-diversified portfolio of stocks has an expected return of 15% when the expected return on the market portfolio is 10%, then Multiple Choice Treasury bills are offering a 7% yield. The portfolio beta is greater than 1.0. The portfolio beta equals 1.67. The investor's portfolio contains many defensive stocks.
6. Consider the following information for Stocks 1 and 2: Expected Standard Stock Return Deviation 1...
6. Consider the following information for Stocks 1 and 2: Expected Standard Stock Return Deviation 1 20% 40% 2 12% 20% NE a. The correlation between the returns of these two stocks is 0.3. How will you divide your money between Stocks 1 and 2 if your aim is to achieve a portfolio with an expected return of 18% p.a.? That is, what are the weights assigned to each stock? Also take note of the risk (i.e., standard deviation) of...
You are given the information on three stocks. Stock Expected Return Number of Shares Stock Price...
You are given the information on three stocks. Stock Expected Return Number of Shares Stock Price Beta A 9% 750 $33 1.5 B 14% 220 $51 1.2 C 12% 460 $19 0.95 Suppose you borrow 70% of your funds at 6% interest rate and invest the borrowed funds as well as the funds you already have in the portfolio incorporating the three stocks. What is the expected return on this portfolio? a. 12.914% b. 14.228 c. 16.65% d. 10.80% e. ...
3) Assume you had two stocks, Stock A had an expected return of 20% and a...
3) Assume you had two stocks, Stock A had an expected return of 20% and a standard deviation of 25%. Stock Bhad an expected return of 15% and a standard deviation of 20%. You want to create a portfolio made up of 65% stock A and 35% stock B. Find the expected return and standard deviation of this portfolio under the following conditions. 3a. Correlation between stock A and B is 1.0 3b. Correlation between stock A and B is...
2. Consider the information in Table 1 Table 1 Expected Return (% Standard Deviation (% Covariance...
2. Consider the information in Table 1 Table 1 Expected Return (% Standard Deviation (% Covariance (Stock 1, Stock 2) Covariance (Stock 1, Stock 3) Stock 1 4.2% 2.49% Stock 2 48% 2.59% 2.30 -20.25 Stock 3 5.0% 10.10% (a) Consider Table 1. Form a portfolio of stocks 1 and 2. Calculate the expected return and standard deviation of an equally-weighted portfolio of stocks 1 and 2 (b) Consider Table 1. Form a portfolio of stocks 1 and 2. Calculate...
Historical Realized Rates of Return You are considering an investment in either individual stocks or a...
Historical Realized Rates of Return You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: Year 2014 2015 2016 2017 2018 -22.80% 39.25 24.75 -6.75 34.50 -5.50 % 20.30 -10.20 48.10 16.25 a. Calculate the average rate of return for each stock during the 5-year period. Do not round Intermediate calculations. Round your answers to two decimal places. Stock A:...
You form a portfolio of stocks. Stock A has an expected return of 4.0%, Stock B...
You form a portfolio of stocks. Stock A has an expected return of 4.0%, Stock B has an expected return of 5.0%, and Stock C has an expected return of 11.9%. If 7% of your portfolio is invested in stock A, and 27% of your stock is invested in Stock C, what is your expected portfolio return?
using the stocks from above question 3
Stock A o (in %) 20 B 0.5 3. The risk-free rate is 0% and the expected return on the market is 10%. You are given the same stocks as in Q 2. Assuming, as in Q 2(b), that you hold the stock as part of a well-diversified portfolio, which stocks would you buy if the expected return on the stocks were as below: Stock Expected return in % MOA co 2. Given...
3. The risk-free rate is 0% and the expected return on the market is 10%. You are given the same stocks as in Q 2. Assuming, as in Q 2(b), that you hold the stock as part of a well-diversified portfolio, which stocks would you buy if the expected return on the stocks were as below: Stock Expected return in % Stock o (in %) 20 B 0.5 D 5 2
6. Consider the following information for Stocks 1 and 2: Expected Standard Stock Return Deviation 1 20% 40% 2 12% 20% NE a. The correlation between the returns of these two stocks is 0.3. How will you divide your money between Stocks 1 and 2 if your aim is to achieve a portfolio with an expected return of 18% p.a.? That is, what are the weights assigned to each stock? Also take note of the risk (i.e., standard deviation) of...
3) Assume you had two stocks, Stock A had an expected return of 20% and a standard deviation of 25%. Stock Bhad an expected return of 15% and a standard deviation of 20%. You want to create a portfolio made up of 65% stock A and 35% stock B. Find the expected return and standard deviation of this portfolio under the following conditions. 3a. Correlation between stock A and B is 1.0 3b. Correlation between stock A and B is...
2. Consider the information in Table 1 Table 1 Expected Return (% Standard Deviation (% Covariance (Stock 1, Stock 2) Covariance (Stock 1, Stock 3) Stock 1 4.2% 2.49% Stock 2 48% 2.59% 2.30 -20.25 Stock 3 5.0% 10.10% (a) Consider Table 1. Form a portfolio of stocks 1 and 2. Calculate the expected return and standard deviation of an equally-weighted portfolio of stocks 1 and 2 (b) Consider Table 1. Form a portfolio of stocks 1 and 2. Calculate...
Historical Realized Rates of Return You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: Year 2014 2015 2016 2017 2018 -22.80% 39.25 24.75 -6.75 34.50 -5.50 % 20.30 -10.20 48.10 16.25 a. Calculate the average rate of return for each stock during the 5-year period. Do not round Intermediate calculations. Round your answers to two decimal places. Stock A:...
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