Variance of market portfolio return = 0.07
Given the assumption of a single factor model, calculate the following:
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- The residual variance of each of the above stocks;
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- The expected return on this 3-stock portfolio;
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- The beta factor of this 3-stock portfolio;
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- The variance of this 3-stock portfolio.
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Variance of market portfolio return = 0.07
Given the assumption of a single factor model,...
Question 3. Capital asset pricing model. (2 points) The expected return on the market portfolio is...
Question 3. Capital asset pricing model. (2 points) The expected return on the market portfolio is 9%. The risk free rate is 5%. The variance of the market portfolio returns is 0.08 and the covariance of the market and GE returns is 0.06. Calculate beta for GE. a) Interpret what beta means. b) Calculate the expected return for GE stock, how is it compared to the expected return on the market portfolio? c) If you form a portfolio with 75%...
Question 3. Capital asset pricing model. (2 points) The expected return on the market portfolio is...
Question 3. Capital asset pricing model. (2 points) The expected return on the market portfolio is 9%. The risk free rate is 5%. The variance of the market portfolio returns is 0.08 and the covariance of the market and GE returns is 0.06. a) Calculate beta for GE. Interpret what beta means. b) Calculate the expected return for GE stock, how is it compared to the expected return on the market portfolio? c) If you form a portfolio with 75%...
Pinulo retums? 1 0 capital asset pricing model given historical data 2. Consider Table 1. (%)...
Pinulo retums? 1 0 capital asset pricing model given historical data 2. Consider Table 1. (%) 3.77 Table 1 Summary Statistics Alpha, Beta, Expected Return and Variance a/c to the Stocks Sample Single Index Model Covariance Residual and Return Alpha Beta with Market Expected Variance Variance Market (%) (%) Return (%) (%) 3.60 3.59 4.80 Market 4.20 0.00 8.70 (a) Consider Table 1. Using the single index model, calculate beta and alpha for stocks 1 and 2. Interpret your findings....
Q2 (e) Assume for simplicity sake that one factor has been deemed appropriate to "explain" returns...
Q2
(e) Assume for simplicity sake that one factor has been deemed appropriate to "explain" returns on stocds (0) How and there is no idiosyncratic risk. Derive the arbitrage pricing theory would you perform a test of the predictions of the capital asset pricing model given historical data (APT) model 2. Consider Tablo 1 Return and Variance a/c to the Stocks Sample Covariance Residual AlphaBeta Expected Variance and Return | with Market | Variance | (96) Return Market 3.60 4.80...
Stock A Stock B 1 0.09 0.07 2 0.06 0.03 3 0.13 0.04 4 -0.03 ...
Stock A Stock B 1 0.09 0.07 2 0.06 0.03 3 0.13 0.04 4 -0.03 0.02 5 0.08 -0.04 a. What are the expected returns of the two stocks? b. What are the standard deviations of the returns of the two stocks? c. If their correlation is 0.43, what is the expected return and standard deviation of a portfolio of 62% stock A and 38% stock B?
Assuming the single-factor APT model applies, the factor beta for the market portfolio is: zero. one....
Assuming the single-factor APT model applies, the factor beta for the market portfolio is: zero. one. the average of the risk-free beta and the beta for the highest risk security in the portfolio. impossible to calculate without collecting sample data. irrelevant to the model.
Stocks A and B have the following returns: Stock A 0.08 0.06 0.15 -0.02 0.07 Stock...
Stocks A and B have the following returns: Stock A 0.08 0.06 0.15 -0.02 0.07 Stock B 0.06 0.01 0.05 0.03 -0.04 a. What are the expected returns of the two stocks? b. What are the standard deviations of the returns of the two stocks? c. If their correlation is 0.46, what is the expected return and standard deviation of a portfolio of 68% stock A and 32% stock B? a. What are the expected returns of the two stocks?...
Annual returns for stocks X, Y, Z, and the Market are given below for the time...
Annual returns for stocks X, Y, Z, and the Market are given below for the time period 2008 to 2013. From the information given in the table above, which of the following choices best describes the betas (B) of Stock X, Stock Y, and Stock Z Year 2008 2009 2010 2011 2012 2013 Stock X 0.20 0.12 0.03 0.15 0.20 0.32 Stock Y 0.12 0.13 0.14 0.12 0.11 0.08 Stock Z 0.08 0.08 0.08 0.08 0.08 0.08 Market 0.13 0.09...
8-3a Expected Portfolio Returns Calculate the expected return of the portfolio based on the following individual...
8-3a Expected Portfolio Returns Calculate the expected return of the portfolio based on the following individual investments and its percentage of the total portfolio. Expected Return Weight -5.4% 10% 3% 23% 3.9% 20% 10% 0% 50% 20% B. 8-3b Portfolio Risk Based on the expected portfolio retums below, te expected return for the portfolio is 5.8% (you can check this). Calculate the standard deviation of the following portfolio: Expected Return Probability 10% 1% 8-3e Beta-Part 1 Returns on technology stocks...
Problem 17 Intro You've assembled the following portfolio: Stock Beta Portfolio weight 1 1.6 0.2 2...
Problem 17 Intro You've assembled the following portfolio: Stock Beta Portfolio weight 1 1.6 0.2 2 1.1 3 0.7 0.5 The expected market return is 9% and the risk-free rate is 2%. Assume that the CAPM holds. i | Attempt 1/5 for 10 pts. Part 1 What is the beta of the portfolio? No decimals Submit Part 2 IB Attempt 175 for 10 pts. What is the expected return of your portfolio? 3+ decimals Submit Intro We know the following...
Question 3. Capital asset pricing model. (2 points) The expected return on the market portfolio is 9%. The risk free rate is 5%. The variance of the market portfolio returns is 0.08 and the covariance of the market and GE returns is 0.06. Calculate beta for GE. a) Interpret what beta means. b) Calculate the expected return for GE stock, how is it compared to the expected return on the market portfolio? c) If you form a portfolio with 75%...
Question 3. Capital asset pricing model. (2 points) The expected return on the market portfolio is 9%. The risk free rate is 5%. The variance of the market portfolio returns is 0.08 and the covariance of the market and GE returns is 0.06. a) Calculate beta for GE. Interpret what beta means. b) Calculate the expected return for GE stock, how is it compared to the expected return on the market portfolio? c) If you form a portfolio with 75%...
Pinulo retums? 1 0 capital asset pricing model given historical data 2. Consider Table 1. (%) 3.77 Table 1 Summary Statistics Alpha, Beta, Expected Return and Variance a/c to the Stocks Sample Single Index Model Covariance Residual and Return Alpha Beta with Market Expected Variance Variance Market (%) (%) Return (%) (%) 3.60 3.59 4.80 Market 4.20 0.00 8.70 (a) Consider Table 1. Using the single index model, calculate beta and alpha for stocks 1 and 2. Interpret your findings....
Q2
(e) Assume for simplicity sake that one factor has been deemed appropriate to "explain" returns on stocds (0) How and there is no idiosyncratic risk. Derive the arbitrage pricing theory would you perform a test of the predictions of the capital asset pricing model given historical data (APT) model 2. Consider Tablo 1 Return and Variance a/c to the Stocks Sample Covariance Residual AlphaBeta Expected Variance and Return | with Market | Variance | (96) Return Market 3.60 4.80...
Stocks A and B have the following returns: Stock A 0.08 0.06 0.15 -0.02 0.07 Stock B 0.06 0.01 0.05 0.03 -0.04 a. What are the expected returns of the two stocks? b. What are the standard deviations of the returns of the two stocks? c. If their correlation is 0.46, what is the expected return and standard deviation of a portfolio of 68% stock A and 32% stock B? a. What are the expected returns of the two stocks?...
Annual returns for stocks X, Y, Z, and the Market are given below for the time period 2008 to 2013. From the information given in the table above, which of the following choices best describes the betas (B) of Stock X, Stock Y, and Stock Z Year 2008 2009 2010 2011 2012 2013 Stock X 0.20 0.12 0.03 0.15 0.20 0.32 Stock Y 0.12 0.13 0.14 0.12 0.11 0.08 Stock Z 0.08 0.08 0.08 0.08 0.08 0.08 Market 0.13 0.09...
8-3a Expected Portfolio Returns Calculate the expected return of the portfolio based on the following individual investments and its percentage of the total portfolio. Expected Return Weight -5.4% 10% 3% 23% 3.9% 20% 10% 0% 50% 20% B. 8-3b Portfolio Risk Based on the expected portfolio retums below, te expected return for the portfolio is 5.8% (you can check this). Calculate the standard deviation of the following portfolio: Expected Return Probability 10% 1% 8-3e Beta-Part 1 Returns on technology stocks...
Problem 17 Intro You've assembled the following portfolio: Stock Beta Portfolio weight 1 1.6 0.2 2 1.1 3 0.7 0.5 The expected market return is 9% and the risk-free rate is 2%. Assume that the CAPM holds. i | Attempt 1/5 for 10 pts. Part 1 What is the beta of the portfolio? No decimals Submit Part 2 IB Attempt 175 for 10 pts. What is the expected return of your portfolio? 3+ decimals Submit Intro We know the following...
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