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Problem 7-12 Diversification Here are the percentage returns on two stocks. Digital Cheese Executive Fruit n...
Digital Executive Cheese Fruit January February March April May June July August +7 +15 +4 +7 -4 -8 a-1. Calculate the variance and standard deviation of each stock. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Digital Cheese Retum Executive Fruit Return Variance Standard deviatio a-2. Which stock is the riskier if held on its own? Digital Cheese O Executive Fruit b. Now calculate the returns in each month of a portfolio that invests an equal...
Here are the returns on two stocks. Digital Cheese Executive Fruit January +17 +9 February −2 +1 March +4 +5 April +6 +15 May −3 +2 June +2 +5 July −1 −2 August −7 −1 Required: a-1. Calculate the variance and standard deviation of each stock. a-2. Which stock is riskier if held on its own? b. Now calculate the returns in each month of a portfolio that invests an equal amount each month in the two stocks. c. Is...
Calculate the variance and standard deviation of each stock
Calculate portfolio returns from each month
Here are the returns on two stocks. Digital Cheese Executive Fruit January February March +18 +6 -2 +2 +4 +5 April Мay +15 +6 -3 +2 June +3 +7 July August -1 -2 -7 -1 Required: a-1. Calculate the variance and standard deviation of each stock. a-2. Which stock is riskier if held on its own? b. Now calculate the returns in each month of...
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:...
here are two stocks in the market, Stock A and Stock B. The price of Stock A today is $78. The price of Stock A next year will be $67 if the economy is in a recession, $90 if the economy is normal, and $100 if the economy is expanding. The probabilities of recession, normal times, and expansion are .23, .57, and .20, respectively. Stock A pays no dividends and has a correlation of .73 with the market portfolio. Stock...
Suppose the expected returns and standard
deviations of Stocks A and B are E(RA) = .088, E(RB) = .148, σA =
.358, and σB = .618.
Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .088, E(RB) = .148, 0A = .358, and 0B = .618. a-1. Calculate the expected return of a portfolio that is composed of 33 percent A and 67 percent B when the correlation between the returns on A and...
Hyacinth Macaw invests 62% of her funds in stock and the balance in stock J. The standard deviation of returns on I is 14%, and on Jit is 26%. (Use decimals, not percents, in your calculations.) a. Calculate the variance of portfolio returns, assuming the correlation between the returns is 1. (Do not round intermediate calculations. Round your answer to 4 decimal places.) Portfolio variance This is a numeric cell, so please enter numbers only. b. Calculate the variance of...
Suppose that the index model for stocks A and B is
estimated from excess returns with the following results:
RA = 2.5% + 0.95RM + eA
RB = –1.8% + 1.10RM + eB
σM = 27%; R-squareA = 0.23; R-squareB = 0.11
Assume you create a portfolio Q, with investment proportions of
0.50 in a risky portfolio P, 0.30 in the market index, and 0.20 in
T-bill. Portfolio P is composed of 60% Stock A and 40% Stock B.
a....
The following are estimates for two stocks. Firm-Specific Standard Deviation Expected Return 12% 18 Stock Beta 0.85 1.40 The market index has a standard deviation of 22% and the risk-free rate is 11% a. What are the standard deviations of stocks A and B? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) StockA Stock B b. Suppose that we were to construct a portfolio with proportions: Stock B Compute the expected return, standard deviation, beta, and...
Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (5 %) (37 %) 0.1 3 0 0.6 14 21 0.1 20 29 0.1 31 45 Calculate the expected rate of return, , for Stock B ( = 13.30%.) Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the standard deviation of expected returns, σA, for Stock A (σB = 20.55%.) Do not round intermediate calculations. Round your...