RA 2% + 1.2 RM + eA RB 3% + 0.7 RM + eB Market SD...

RA	2%	+	1.2	RM	+	eA
RB	3%	+	0.7	RM	+	eB

Market SD	20%

R-SquareA	30%
R-SquareB	12%

Calculate Covariance between stock A and Market?

		0.0257
		0.0325
		0.0480
		0.0540

Expert Solution

jeff jeffy answered 2 months ago

RA = 3.5% + 0.65RM + eA RB = −1.6% + 0.80RM + eB σM =...

RA = 3.5% + 0.65RM + eA RB = −1.6% + 0.80RM + eB σM = 21%; R-squareA = 0.22; R-squareB = 0.14 Assume you create a portfolio Q, with investment proportions of 0.50 in a risky portfolio P, 0.30 in the market index, and 0.20 in T-bill. Portfolio P is composed of 60% Stock A and 40% Stock B. a. What is the standard deviation of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round...

Consider 3 stocks: A with E(RA)= 15% and SD(RA)=20%, B with E(RB) =14% and SD(RB)=24% and...

Consider 3 stocks: A with E(RA)= 15% and SD(RA)=20%, B with E(RB) =14% and SD(RB)=24% and C with E(RC)=18% and SD(RC)=30%. The risk free rate RF= 6%, 1. which stock would you combine with the risk free to form a portfolio? 2. write the equation of Capital market line 3. If you consider that your target risk is 15%, what would be the composition of your final portfolio?

Consider the following variance-covariance matrix rm rA rB rC rD rM 0.41 rA 0.43 0.65 rB...

Consider the following variance-covariance matrix rm rA rB rC rD rM 0.41 rA 0.43 0.65 rB 0.49 0.39 0.84 rC 0.30 0.13 0.30 0.58 rD 0.50 0.43 0.61 0.34 1.48 Average return rM rA rB rC rD R average return 0.0585 0.1122 0.0314 0.0525 -0.0563 0.03 a. if you would like to create a risky protfolio X of two stocks - stock A and stock C, how would you allocate your investments? identify the minimum variance portfolio consisting of stocks...

The market and stock A have the following probability distributions: Probability Rm Ra .3...

The market and stock A have the following probability distributions: Probability Rm Ra .3 15% 20% .4 9% 5% .3 18% 12% Q1. Calculate the expected rates of return for the market and stock A. Q2. Calculate the standard deviation for the market and stock A. Q3. Calculate the coefficient of variation for the market and stock a.

Suppose rRF = 3%, rM = 12%, and bi = 1.2. 2. Now suppose rRF decreases...

Suppose rRF = 3%, rM = 12%, and bi = 1.2. 2. Now suppose rRF decreases to 2%. The slope of the SML remains constant. How would this affect rM and ri? -Select-IIIIIIIVVItem 3 What is ri, the required rate of return on Stock i? Round your answer to one decimal place. % 1. Now suppose rRF increases to 4%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will remain...

2. Two stocks A and B have return and risk information: E(rA) = 8%, E(rB) =...

2. Two stocks A and B have return and risk information: E(rA) = 8%, E(rB) = 10%; aA = 12%, aB = 15%; pAB = 0.6. The two stocks are used to construct a minimum variance portfolio. Answer the following questions: 2.1. What is the weight of stock A of the minimum variance portfolio? 2.2. What is the expected return of the minimum variance portfolio? 2.3. What is the standard deviation of the minimum variance portfolio?

Rank the following atoms or ions in order of increasing radius: As^3-, Se^2-, Ge^4+, Rb^+, Br^-...

Rank the following atoms or ions in order of increasing radius: As^3-, Se^2-, Ge^4+, Rb^+, Br^- Ca, Ba, Sr, Be, Mg Al, Cl, P, Si, S Sb, As, F, S, Tl Name an element who have similar physical/and or chemical properties to the following elements: Al Ca O

Suppose rRF = 3%, rM = 12%, and bi = 1.4. 2. Now suppose rRF decreases...

Suppose rRF = 3%, rM = 12%, and bi = 1.4. 2. Now suppose rRF decreases to 2%. The slope of the SML remains constant. How would this affect rM and ri? -Select-IIIIIIIVVItem 3 What is ri, the required rate of return on Stock i? Round your answer to one decimal place. % 1. Now suppose rRF increases to 4%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will decrease...

Suppose rRF = 3%, rM = 12%, and bi = 1.6. 2. Now suppose rRF decreases...

Suppose rRF = 3%, rM = 12%, and bi = 1.6. 2. Now suppose rRF decreases to 2%. The slope of the SML remains constant. How would this affect rM and ri? -Select What is ri, the required rate of return on Stock i? Round your answer to one decimal place. % 1. Now suppose rRF increases to 4%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will remain the...

A rm has production function q = K^1/3 L^2/3. Input prices are w = 1 for...

A rm has production function q = K^1/3 L^2/3. Input prices are w = 1 for labor (L), and r=1 for capital (K). a. Write down the firm's Cost Minimization Problem. Derive the optimality conditions. b. Define the optimal choice of inputs, i.e. solve the Cost Minimization problem above for K and L. c. What is the total cost to produce q=4 units of output?

Question