Homework Answers
Stock C
The outperformance relative to the stock market is given by Beta and hence stock C would outperform.
Beta is the measure of how much the stock is correlated with the market. A beta of 1 or less signifies that the stock would move less as compared to the stock market. A beta higher than 1 suggests that the stock would outperform the market in good economic time and would do worse than stock market during bad economic times.
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You have the following data on three stocks: Stock Standard Deviation Beta A 20% 1.00 B...
You have the following data on three stocks: Stock Standard Deviation Beta A 20% 1.00 B...
You have the following data on three stocks: Stock Standard Deviation Beta A 20% 1.00 B 14% 0.64 C 20% 1.29 You are investor a well diversified investor who believes that one must be fully invested at all times. You are expecting the stock market is set to see a meaningful rise during the next year due to improving economic conditions. Which one of the above stocks would you add to your portfolio to help your portfolio outperform the stock market...
You have the following data on three stocks: Stock Standard Deviation Beta A 20% 0.59 B...
You have the following data on three stocks: Stock Standard Deviation Beta A 20% 0.59 B 14% 0.64 C 10% 1.29 You are a very conservative investor and wish to minimize risk in your investments. If you were to hold only one (1) stock in your investment account you would choose Stock ____. If, however, you were adding to an already well-diversified portfolio you would choose Stock ____ .
You have the following data on three stocks: STOCK STANDARD DEVIATION BETA A 10% 1.29 B...
You have the following data on three stocks: STOCK STANDARD DEVIATION BETA A 10% 1.29 B 12% .69 C 20% .59 If you are a strict risk minimizer, you would chose stock , if its to be held in a well diversified portfolio and stock , if it is to be held in isolation.
B 0 You have the following data on three stocks! Stock Beta Standard Deviation 79 0.IS...
B 0 You have the following data on three stocks! Stock Beta Standard Deviation 79 0.IS 161 oias 1.29 0.12 ifit is to be held in K minimizer you would choose stack Isolation and stocks or if it is to be held as part of a well-diversed Portfolio A, A VAB As a risk minimizer, you u С, В
You have the following data on three stocks: Stock
You have the following data on three stocks: Stock Standard Deviation Beta A 18% 1.20 B 15% 0.89 C 12% 1.29 If you are a strict risk minimizer, you would choose Stock ____ if it is to be held in isolation and Stock ____ if it is to be held as part of a well-diversified portfolio.
You have developed the following data on three stocks: Stocks Std. Deviation Beta A 0.45 0.60...
You have developed the following data on three stocks: Stocks Std. Deviation Beta A 0.45 0.60 B 0.60 0.75 C 0.55 1.50 If you are a risk minimizer, you should choose Stock ________ if it is to be held in isolation and Stock __________ if it is to be held as part of a well-diversified portfolio.
There are three stocks in the market, stock A, stock B, and stock C. The price...
There are three stocks in the market, stock A, stock B, and stock C. The price of stock A today is $75. The price of stock A next year will be $63 if the economy is in a recession, $83 if the economy is normal, and $95 if the economy is expanding. The probabilities of recession, normal times, and expansion are 0.20, 0.65, and 0.15, respectively. Stock A pays no dividends and has a beta of 0.64. Stock B has...
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...
Stock X has an expected return of 15%, standard deviation of 20%, beta of 0.8. Stock...
Stock X has an expected return of 15%, standard deviation of 20%, beta of 0.8. Stock Y has an expected return of 20%, a standard deviation of 40% and a beta of 0.3, and a correlation with stock X of 0.6. Assume the CAPM holds. a. If you are a typical, risk-averse investor with a well-diversified portfolio, which stock would you prefer? b. What are the expected return and standard deviation of a portfolio consisting of 30% of stock X...
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...
B 0 You have the following data on three stocks! Stock Beta Standard Deviation 79 0.IS 161 oias 1.29 0.12 ifit is to be held in K minimizer you would choose stack Isolation and stocks or if it is to be held as part of a well-diversed Portfolio A, A VAB As a risk minimizer, you u С, В
There are three stocks in the market, stock A, stock B, and stock C. The price of stock A today is $75. The price of stock A next year will be $63 if the economy is in a recession, $83 if the economy is normal, and $95 if the economy is expanding. The probabilities of recession, normal times, and expansion are 0.20, 0.65, and 0.15, respectively. Stock A pays no dividends and has a beta of 0.64. Stock B has...
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...
Stock X has an expected return of 15%, standard deviation of 20%, beta of 0.8. Stock Y has an expected return of 20%, a standard deviation of 40% and a beta of 0.3, and a correlation with stock X of 0.6. Assume the CAPM holds. a. If you are a typical, risk-averse investor with a well-diversified portfolio, which stock would you prefer? b. What are the expected return and standard deviation of a portfolio consisting of 30% of stock X...
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...
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