Homework Answers
| State of economy | Probability | Stock A | Stock B | |||||
| Weak | 50.00% | -12.00% | 5.00% | |||||
| Average | 30.00% | 8.00% | 7.00% | |||||
| Strong | 20.00% | 13.00% | 15.00% | |||||
| Computation of expected return (Stock A-40%, Stock B-60%) | ||||||||
| 40% | 60% | Average return= Probability * return | Deviation= Return less average return | Deviation^2 | Deviation^2*Probability | |||
| State of economy | Probability | Stock A | Stock B | Portfolio | Portfolio | Portfolio | Portfolio | Stock A |
| Return*weight | ||||||||
| Weak | 50.00% | -4.800% | 3.00% | -1.800% | -0.90% | -5.96% | 0.355% | 0.1776% |
| Average | 30.00% | 3.200% | 4.20% | 7.400% | 2.22% | 3.24% | 0.105% | 0.0315% |
| Strong | 20.00% | 5.200% | 9.00% | 14.200% | 2.84% | 10.04% | 1.008% | 0.2016% |
| Total | 4.16% | 0.4107% | ||||||
| Expected return-Portfolio | 4.2% | |||||||
| Variance-Portfolio | 0.4% | |||||||
| Standard deviation-Portfolio | 6.4% | Variance ^0.5 | ||||||
| So option 2 is the right answer. |
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Question 8 (1 point) You have a portfolio with 40% invested in stock A and 60%...
a. You have constructed a portfolio consisting of 40 percent Stock A and 60 percent Stock...
a. You have constructed a portfolio consisting of 40 percent Stock A and 60 percent Stock B. Stock A has expected return of 15 percent and standard deviation of 20 percent. Stock B has expected return of 7 percent and standard deviation of 10 percent. The correlation between the returns of these stocks is 0.5. Compute the expected return and standard deviation of your portfolio returns. (10 pts)
a. You have constructed a portfolio consisting of 40 percent Stock A and 60 percent Stock...
a. You have constructed a portfolio consisting of 40 percent Stock A and 60 percent Stock B. Stock A has expected return of 15 percent and standard deviation of 20 percent. Stock B has expected return of 7 percent and standard deviation of 10 percent. The correlation between the returns of these stocks is 0.5. Compute the expected return and standard deviation of your portfolio returns. (10 pts) b. Using a diagram to illustrate your points, explain the two key...
a. You have constructed a portfolio consisting of 40 percent Stock A and 60 percent Stock...
a. You have constructed a portfolio consisting of 40 percent Stock A and 60 percent Stock B. Stock A has expected return of 15 percent and standard deviation of 20 percent. Stock B has expected return of 7 percent and standard deviation of 10 percent. The correlation between the returns of these stocks is 0.5. Compute the expected return and standard deviation of your portfolio returns. (10 pts) D. Using a diagram to illustrate your points, explain the two key...
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26) A portfolio has 40% invested in stock A and the rest invested in stock B. If stock A has a beta of 1.3 and stock B has a beta of 0.9, what’s the beta of the portfolio? 27) Calculate the standard deviation of a portfolio that contains 40% of one stock with a standard deviation of 27% and 60% of another stock with a standard deviation of 13% and the correlation of their stock returns is 0.9. (Enter your...
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Given the following information, What is the expected return on a portfolio which is invested 40% in Stock X and 60% in Stock Y? State of Economy Prob. Stock X Stock Y Boom 10% 25% -17% Normal 70% 10% 7% Recession 20% -15% 30%
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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...
consider a portfolio investment consisting of 40% invested in MTN, 60% invested in Multichoice. additional information...
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Consider the following information about three stocks: a. If your portfolio is invested 40 percent each...
Consider the following information about three stocks:
a. If your portfolio is invested 40 percent each in A and B and
20 percent in C, what is the portfolio expected return? The
variance? The standard deviation?
b.If the expected T-bill is is 3.80 percent, what is the
expected premium on the portfolio?
c. If the expected inflation rate is 3.50 percent, what are the
appropriate and exact expected real returns on the portfolio?What
are the approximate and exact expected real...
2) What is the expected return and standard deviation of a portfolio that is invested in...
2) What is the expected return and standard deviation of a portfolio that is invested in stocks A, B, and C? Twenty five percent of the portfolio is invested in stock A, 40 percent is invested in stock C, and the remaining is invested in stock B. (20 pts) Probability of State of Economy State of Economy Boom Normal Recession 5% Returns if State Occurs Stock A Stock B Stock C 17% 6% 22% 8% 10% 15% -3% 19% -25%...
a. You have constructed a portfolio consisting of 40 percent Stock A and 60 percent Stock B. Stock A has expected return of 15 percent and standard deviation of 20 percent. Stock B has expected return of 7 percent and standard deviation of 10 percent. The correlation between the returns of these stocks is 0.5. Compute the expected return and standard deviation of your portfolio returns. (10 pts)
a. You have constructed a portfolio consisting of 40 percent Stock A and 60 percent Stock B. Stock A has expected return of 15 percent and standard deviation of 20 percent. Stock B has expected return of 7 percent and standard deviation of 10 percent. The correlation between the returns of these stocks is 0.5. Compute the expected return and standard deviation of your portfolio returns. (10 pts) b. Using a diagram to illustrate your points, explain the two key...
a. You have constructed a portfolio consisting of 40 percent Stock A and 60 percent Stock B. Stock A has expected return of 15 percent and standard deviation of 20 percent. Stock B has expected return of 7 percent and standard deviation of 10 percent. The correlation between the returns of these stocks is 0.5. Compute the expected return and standard deviation of your portfolio returns. (10 pts) D. Using a diagram to illustrate your points, explain the two key...
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...
Consider the following information about three stocks:
a. If your portfolio is invested 40 percent each in A and B and
20 percent in C, what is the portfolio expected return? The
variance? The standard deviation?
b.If the expected T-bill is is 3.80 percent, what is the
expected premium on the portfolio?
c. If the expected inflation rate is 3.50 percent, what are the
appropriate and exact expected real returns on the portfolio?What
are the approximate and exact expected real...
2) What is the expected return and standard deviation of a portfolio that is invested in stocks A, B, and C? Twenty five percent of the portfolio is invested in stock A, 40 percent is invested in stock C, and the remaining is invested in stock B. (20 pts) Probability of State of Economy State of Economy Boom Normal Recession 5% Returns if State Occurs Stock A Stock B Stock C 17% 6% 22% 8% 10% 15% -3% 19% -25%...
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