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Stock B:0.1988 Stock A:0.1471 Stock B;0.1941 Question 15 1 pts Consider the information for Stock Art...
Question 15 IP Consider the information for Stock Art and Stock Bxa below. The risk-free interest...
Question 15 IP Consider the information for Stock Art and Stock Bxa below. The risk-free interest rate is 3.90%. If you have to choose only one of these stocks for your investment, which stock would you choose based on the Sharpe Ratio? Stock Art 11.6% Stock Bxa 8% Expected return Standard deviation 5.8% 4.6% Stock Bxa Stock Art
Intro Assume that there are only two stocks in the economy, stock A and stock B. The risk-free asset has a return of 3%...
Intro Assume that there are only two stocks in the economy, stock A and stock B. The risk-free asset has a return of 3%. The optimal risky portfolio, i.e., the portfolio with the highest Sharpe ratio, is given below: A BC Stock A Stock B Risk-free asset 2 Expected return 0.062 0.075 0.03 3 Variance 0.1521 0.0484 4 Standard deviation 0.39 0.22 5 Covariance 0.02574 D Optimal risky portfolio 8 Weights 9 Expected return 10 Variance 11 Standard deviation 12...
You are holding two stocks: Stock A and Stock B. Assume the following information: Realized return:...
You are holding two stocks: Stock A and Stock B. Assume the following information: Realized return: RA = 0.20, RB = 0.10 Standard deviation: SD(RA) = 0.30, SD(RB) = 0.20 BetaA = 0.87, BetaB = 1.46 rf = 0.03; the expected return on the market portfolio is 12% a. Which stock has a higher level of total risk? Which stock has a higher level of systematic risk? Explain your answer. b. What is the risk premium for Stock A and...
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...
Consider the following information: Rate of Return if State Occurs Stock A Stock B State of Economy Recession Normal Bo...
Consider the following information: Rate of Return if State Occurs Stock A Stock B State of Economy Recession Normal Boom Probability of State of Economy .15 .50 .35 .02. -.30 .18 .10 .15 .31 a. Calculate the expected return for the two stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation for the two stocks. (Do not round intermediate calculations and enter your answers...
Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate...
Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 4%, and the market’s average return was 11%. Performance is measured using an index model regression on excess returns. Stock A Stock B Index model regression estimates 1% + 1.2(rM − rf) 2% + 0.8(rM − rf) R-square 0.683 0.49 Residual standard deviation, σ(e) 12.1% 20.9% Standard deviation of excess returns 23.4% 28.5% a. Calculate the following statistics for each...
1. We observe the following annual returns on a stock in the past three years. The...
1. We observe the following annual returns on a stock in the past three years. The annual risk- free rate is 5%. Year 2016 2016 | Realized Return | 10% - 2017 300% 2018 -10% 2018 | (a) What is the arithmetic average stock return? (4%) (b) What is the geometric average stock return? (4%) (c) What are the sample mean and standard deviation of the stock return? (8%) (d) What is the stock's Sharpe ratio? (4%) (e) Jessica invests...
2. Consider the information in Table1. Table 1 Standard Deviation of Stock Stock Correlation with Market...
2. Consider the information in Table1. Table 1 Standard Deviation of Stock Stock Correlation with Market Portfolio 0.75 0.20 Stock 20% 15% 14% 0% 49% ected Market Return Risk Free Rate Return (a) Consider Table 1 . Calculate betas for Stock 1, Stock 2, and a portfolio consisting of 75% invested in Stock 1 and (b) Consider Table 1. Compute the equilibrium expected return according to the CAPM for Stock 1, Stock 2, and the (c) Consider Table 1 and...
Consider the following assets available for investment: 1. A stock index fund 2. A corporate bond...
Consider the following assets available for investment: 1. A stock index fund 2. A corporate bond fund 3. A utility fund 4. A global fund 5. A treasury fund You have research on the funds that has projected out the expected returns (in percent) for the funds along with the probabilities of those returns occurring. The following table shows the expectations: probability CBFUF SIF -18 Rec 15 -5 GF TE -20 3 -10 153 N Rec -7 wwww norm .3...
4. Stock A has the expected return of 12%, the standard deviation of 15%, and the...
4. Stock A has the expected return of 12%, the standard deviation of 15%, and the CAPM beta of 0.5. Stock B has the expected return of 18%, the standard deviation of 20% and the CAPM beta of 1.1. The risk-free rate is 3%. If you have no other wealth could invest in some combination of the risk-free asset and only one of these two stocks, which of the stocks A and B will you choose and why? (1 point)
Question 15 IP Consider the information for Stock Art and Stock Bxa below. The risk-free interest rate is 3.90%. If you have to choose only one of these stocks for your investment, which stock would you choose based on the Sharpe Ratio? Stock Art 11.6% Stock Bxa 8% Expected return Standard deviation 5.8% 4.6% Stock Bxa Stock Art
Intro Assume that there are only two stocks in the economy, stock A and stock B. The risk-free asset has a return of 3%. The optimal risky portfolio, i.e., the portfolio with the highest Sharpe ratio, is given below: A BC Stock A Stock B Risk-free asset 2 Expected return 0.062 0.075 0.03 3 Variance 0.1521 0.0484 4 Standard deviation 0.39 0.22 5 Covariance 0.02574 D Optimal risky portfolio 8 Weights 9 Expected return 10 Variance 11 Standard deviation 12...
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...
Consider the following information: Rate of Return if State Occurs Stock A Stock B State of Economy Recession Normal Boom Probability of State of Economy .15 .50 .35 .02. -.30 .18 .10 .15 .31 a. Calculate the expected return for the two stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation for the two stocks. (Do not round intermediate calculations and enter your answers...
1. We observe the following annual returns on a stock in the past three years. The annual risk- free rate is 5%. Year 2016 2016 | Realized Return | 10% - 2017 300% 2018 -10% 2018 | (a) What is the arithmetic average stock return? (4%) (b) What is the geometric average stock return? (4%) (c) What are the sample mean and standard deviation of the stock return? (8%) (d) What is the stock's Sharpe ratio? (4%) (e) Jessica invests...
2. Consider the information in Table1. Table 1 Standard Deviation of Stock Stock Correlation with Market Portfolio 0.75 0.20 Stock 20% 15% 14% 0% 49% ected Market Return Risk Free Rate Return (a) Consider Table 1 . Calculate betas for Stock 1, Stock 2, and a portfolio consisting of 75% invested in Stock 1 and (b) Consider Table 1. Compute the equilibrium expected return according to the CAPM for Stock 1, Stock 2, and the (c) Consider Table 1 and...
Consider the following assets available for investment: 1. A stock index fund 2. A corporate bond fund 3. A utility fund 4. A global fund 5. A treasury fund You have research on the funds that has projected out the expected returns (in percent) for the funds along with the probabilities of those returns occurring. The following table shows the expectations: probability CBFUF SIF -18 Rec 15 -5 GF TE -20 3 -10 153 N Rec -7 wwww norm .3...
4. Stock A has the expected return of 12%, the standard deviation of 15%, and the CAPM beta of 0.5. Stock B has the expected return of 18%, the standard deviation of 20% and the CAPM beta of 1.1. The risk-free rate is 3%. If you have no other wealth could invest in some combination of the risk-free asset and only one of these two stocks, which of the stocks A and B will you choose and why? (1 point)
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