You have estimated that the annual expected return on Apple
stock is 15% and that Apple’s standard deviation is 20%. The
Treasury bill rate is 1%. You are considering an asset allocation
between T-bills and Apple stock and given your risk preferences and
investment objectives, you seek to establish a portfolio with an
expected return of 8%.
27. In relation to the problem above, what proportion of your
portfolio should you allocate to Apple stock (rounding to the
nearest whole...
You can invest your money in either investment ONE or investment
TWO. You will invest for 2 years. Investment ONE yields 6% he first
year and 65% the second year. Investment TWO yields 65% the first
year and 6% the second year. Interest is compounded the same for
both investments. Also, interest is compounded the same for both
years. Which investment leads to the higher return?
a. investment ONE
b. investment TWO
c. the return on investment ONE = the...
You have decided to invest 40% of your wealth in
McDonalds which has an expected return of 15% and a standard
deviation of 15%, and 60% of your wealth in GE which has an
expected return of 9% and a standard deviation of 14%. If the
correlation McDonalds and GM is 0.5, what is the standard deviation
of your portfolio?
a) 11.4%
b) 13.1%
c) 12.51%
d) 10%
today’s share price of Apple is $270. You think Apple’s stock
will rise over the next 3 months. Today you observe the following
option prices (all expiring in 3 months): Option 1: Call Option
Premium = $9; with a Strike Price = $275 Option 2: Call Option
Premium = $7; with a Strike Price = $280
1. Which of these options is in-the-money today?
A) Both B) Neither C) Only Option 1 D) Only Option 2 4
2. Today you...
1. The stock price of Apple is $106. You have $10,000 to invest.
The monthly interest rate is 0.5%.
a. You think the stock price will go up soon, and want to trade
120 shares. What should you do? Enter 120 for buying 120 shares (on
margin if necessary), or -120 for selling or short-selling 120
shares.
b. What is your initial percentage margin (entered as a decimal
number)?
c. Two months later, the stock price is $126. What is...
You can currently borrow or invest in the US at 2% and you can
borrow or invest in Japan at 3%. The current exchange rate is
$0.01/Yen. Inflation rate in the US is expected to be 5% and
expected to be 1% in Japan. If the exchange rates will have
adjusted to differences in inflation by the end of one year, show
how these numbers will allow you to make profit. Be Specific. Show
the profit you would make at...
You have $1M to invest. You want to maximize returns subject to
a portfolio standard deviation of 11%. Assume the S&P500 index
is the market portfolio (m), and that it has an expected return of
9% and a standard deviation of 15%. The risk free rate is 3%.
(a) Consider investing in a combination of m and rf. Given your
willingness to accept a standard deviation of 11%, what is the
expected return on your portfolio?
You are now contemplating...
you have $100 to invest in two different investment projects, A
and B, the total returns from which (TR and TR) are given below.
the cost of purchasing a unit of investment in each project is $10
per unit. your problem is to invest the $100 in the two invest the
$100 in the two investments so as to maximize your total return
(for example, if you invested the entire $100 in investment B, you
would receive a total return...
You have $100,000 to invest in either Stock D, Stock F, or a
risk-free asset. You must invest all of your money. Your goal is to
create a portfolio that has an expected return of 11.4 percent. If
D has an expected return of 13.6 percent, F has an expected return
of 9.7 percent, the risk-free rate is 3.8 percent, and you invest
$50,000 in Stock D, how much will you invest in Stock F?
The returns on a stock for the last 5 years have been 32%, 18%,
-20%, 16%, and -16%. Assume that you purchased the stock 5 years
ago for $34.25 and that all returns have come in the form of either
capital gains or losses (i.e., there have been no dividends). (4
points) a. What is the price of the stock today? b. Compute the
average (arithmetic) annual return. c. Compute the geometric
average annual return.