Homework Answers
Ans 10 ) If market is going to up then my strategy will be to allocate more assets on the high beta stock in that case I will generate more profit when there is huge increase in share price. Thus I will reshuffle my portfolio from low beta stock to high beta stock.
Add Answer to:
(10) Assume that you hold a diversified portfolio and you believe that the market is going...
You hold a diversified portfolio consisting of many different common stocks with a total market value...
You hold a diversified portfolio consisting of many different common stocks with a total market value of $100,000. The portfolio beta is equal to 1.15. You have decided to sell one of your stocks, a lead mining stock whose beta is equal to 0.6, for $10,000 net and to use the proceeds to buy $10,000 of stock in a steel company whose beta is equal to 1.5. What will be the new beta of the portfolio? (Round to two digit...
Assume that you are holding a well-diversified portfolio in which the expected returns on your portfolio...
Assume that you are holding a well-diversified portfolio in which the expected returns on your portfolio resemble the expected market returns in the last problem. If you add CRU to your investment portfolio, the new portfolio will be comprised of 20% ofCRU and 80% of the old portfolio. What is the new portfolio's expected return? If you added WT instead of CRU, what would be the expected return on the portfolio? 9.52%: 9.44% You are considering investing in one of...
42. You hold a diversified portfolio consisting of an equal investment in each of 15 different...
42. You hold a diversified portfolio consisting of an equal investment in each of 15 different common stocks. The portfolio beta is equal to 1.61. You have decided to sell all shares of one of your stocks. The stock you are selling has a beta of 0.45. You plan to use the proceeds to purchase another stock that has a beta equal to 2.70. What will be the beta of the new portfolio?
1. “These days in particular, international stocks are too volatile to hold in a diversified portfolio.”...
1. “These days in particular, international stocks are too volatile to hold in a diversified portfolio.” Discuss. 2. You work for a publicly traded company that is considering a bid for another firm. As part of this work, you have been tasked with valuing this ‘target’ firm. The target firm is closely held by a single family; the firm is the only valuable asset that the family holds. What is the role of idiosyncratic risk in preparing an initial bid...
Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a...
Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20. You are in the process of buying 1,000 shares of Alpha Corp at $10 a share and adding it to your portfolio. Alpha has an expected return of 22.5% and a beta of 1.20. The total value of your current portfolio is $90,000. What will the expected return and beta on the portfolio be after the purchase of the Alpha stock?...
29. Suppose you hold a well-diversified portfolio with a very large number of securities, and that...
29. Suppose you hold a well-diversified portfolio with a very large number of securities, and that the single index model is correct. If the risk-free rate is 2.5%, the market return is 13.6%, the Std Dev of your portfolio is 21% and the Std Dev of the market is 13%; then the return on your portfolio would be approximately: 30. Freddy has determined that for Calicentrics Central, expected return is 9.8%, and the standard deviation is 15.2. She has also...
Typical finance textbooks purport that when you construct a diversified portfolio of about 30 stocks, you...
Typical finance textbooks purport that when you construct a diversified portfolio of about 30 stocks, you will eliminate all the unsystematic risk in the portfolio. Go to Motley Fool’s website and explain their position about this number. What do they recommend as the optimal number of stocks to hold in a portfolio? What is their argument for this number? If you have your own opinion and/or experience, please share it.
Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a...
Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20. You are in the process of buying 1,000 shares of Alpha Corp at $15 a share and adding it to your portfolio. Alpha has an expected return of 21.5% and a beta of 1.70. The total value of your current portfolio is $85,000. What will the expected return and beta on the portfolio be after the purchase of the Alpha stock?...
Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a...
Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20. You are in the process of buying 1,000 shares of Alpha Corp at $15 a share and adding it to your portfolio. Alpha has an expected return of 21.5% and a beta of 1.70. The total value of your current portfolio is $85,000. What will the expected return and beta on the portfolio be after the purchase of the Alpha stock?...
A portfolio has a market value of S1 million. The initial portfolio value and the portfolio value after one quarter are shown in the following table. Date Portfolio value Money market instruments...
A portfolio has a market value of S1 million. The initial portfolio value and the portfolio value after one quarter are shown in the following table. Date Portfolio value Money market instruments Stocks Jan 1 $1,000,000 $300,000 $700,000 Mar 31 $1,040,000 $300,000 $740,000 The money market instruments earn no interest. Required: Suppose the investment policy statement requires a target asset allocation of 70% in stocks and 30% in money market instruments. The portfolio manager begins to reallocate the funds between...
Assume that you are holding a well-diversified portfolio in which the expected returns on your portfolio resemble the expected market returns in the last problem. If you add CRU to your investment portfolio, the new portfolio will be comprised of 20% ofCRU and 80% of the old portfolio. What is the new portfolio's expected return? If you added WT instead of CRU, what would be the expected return on the portfolio? 9.52%: 9.44% You are considering investing in one of...
Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20. You are in the process of buying 1,000 shares of Alpha Corp at $10 a share and adding it to your portfolio. Alpha has an expected return of 22.5% and a beta of 1.20. The total value of your current portfolio is $90,000. What will the expected return and beta on the portfolio be after the purchase of the Alpha stock?...
29. Suppose you hold a well-diversified portfolio with a very large number of securities, and that the single index model is correct. If the risk-free rate is 2.5%, the market return is 13.6%, the Std Dev of your portfolio is 21% and the Std Dev of the market is 13%; then the return on your portfolio would be approximately: 30. Freddy has determined that for Calicentrics Central, expected return is 9.8%, and the standard deviation is 15.2. She has also...
A portfolio has a market value of S1 million. The initial portfolio value and the portfolio value after one quarter are shown in the following table. Date Portfolio value Money market instruments Stocks Jan 1 $1,000,000 $300,000 $700,000 Mar 31 $1,040,000 $300,000 $740,000 The money market instruments earn no interest. Required: Suppose the investment policy statement requires a target asset allocation of 70% in stocks and 30% in money market instruments. The portfolio manager begins to reallocate the funds between...
Most questions answered within 3 hours.
-
What is the purpose of the 2' hydroxyl group in RNA? What is
the reason this...
asked 4 minutes ago -
You currently have 20,000X ethidium bromide. You want to make
250 mL of 1X ethidium bromide...
asked 17 minutes ago -
What mass of lead is needed to absorb 348 J of heat if the temp
of...
asked 19 minutes ago -
Explain the difference between an auction with reserve
and an auction without reserve. if not specified,...
asked 21 minutes ago -
Write the net ionic equation for the precipitation reaction that
occurs when aqueous solutions of aluminum...
asked 25 minutes ago -
How do we find the slope distance, given the horizontal distance
and the zenith angle?
For...
asked 23 minutes ago -
The table to the right lists probabilities for the corresponding
numbers of girls in three births....
asked 35 minutes ago -
The inverse demand function for good X is P = 5−0.05Q. The
firm’s cost curve is...
asked 33 minutes ago -
The Fresh Connection is really pushing the new line of juice
products. Given that it takes...
asked 39 minutes ago -
An acute decrease in mean arterial pressure (by getting up very
quickly, for instance) will cause...
asked 37 minutes ago -
Is the pH of solutions important when using the Fluoride ISE? If
so, why?
asked 41 minutes ago -
Producer surplus is:
a.
always equal to consumer surplus.
b.
the amount paid to sellers above...
asked 42 minutes ago