1. Consider a stock with the following return information for 2015-2020 Year Return 2015 25% 2016 ...

1. Consider a stock with the following return information for 2015-2020

Year Return

2015 25%

2016 -15%

2017 3%

2018 41%

2019 -6%

2020 12%

Find the following for your sample of returns: Average Return, Variance, and Standard Deviation.

2. Jamie’s portfolio consists of $15,000 in Microsoft stock and $45,000 in Coca Cola. Microsoft has an expected return of 19% annually with a standard deviation of 42%. Coca Cola has an expected return of 10% annually with a standard deviation of 20%. The correlation between the 2 stocks has been 0.3.

a) Calculate the expected return of Jamie’s portfolio

b) Calculate the standard deviation of Jamie’s portfolio

Expert Solution

jeff jeffy answered 1 year ago

Consider the following: You have Stock A and Stock B Expected Return of A is 25% Expected...

Consider the following: You have Stock A and Stock B Expected Return of A is 25% Expected Return of B is 35% Standard Deviation (volatility) of A is 17% Standard Deviation (volatility) of B is 28% a) Calculate the expected return and standard deviation of your portfolio if you invest $4,000 in A and $6,000 in B. The correlation between A and B is 0.40. b) Do you derive any diversification benefits by investing in both A and B? Why or...

Consider the following information: Stock Return if Market Return Is: Stock –11% 11% A 0 13...

Consider the following information: Stock Return if Market Return Is: Stock –11% 11% A 0 13 B –13 12 C –33 20 D 10 14 E 21 -8 What is the beta of each of the stocks? (Leave no cells blank - be certain to enter "0" wherever required. Use decimals, not percents, in your calculations. A negative value should be indicated by a minus sign. Round your answers to 1 decimal place.)

year stock A stock B 2015 3 % 40% 2016 5 % -5% 2017 1 %...

year stock A stock B 2015 3 % 40% 2016 5 % -5% 2017 1 % 30% 2018 10 % -10% 2019 6 % 35 % (1) Determine the correlation coefficient of returns of stocks A and B. Can you reduce risk by creating a portfolio of the combination of both stocks? why or why not? (2) if you invest 80% of money in stock A and another 20% in stock B, calculate expected rate of return and standard deviation...

Question 3 (25 marks) Consider the following information: (Rate of Return) (Rate of Return) State of...

Question 3 Consider the following information: (Rate of Return) (Rate of Return) State of Economy Probability Stock A Stock B Recession 0.30 2% 5% Normal 0.50 7% 4% Boom 0.20 12% 3% Required: a,) Calculate the expected return for the two Stocks A and B respectively. b.) Calculate the standard deviation for the two Stocks A and B respectively. c,) If you own a portfolio that has $1.3 million invested in Stock A and $2.2 million invested in Stock...

1 Consider the following returns: Year End Stock Y Realized Return Stock Z Realized...

1 Consider the following returns: Year End Stock Y Realized Return Stock Z Realized Return 2004 -14.6% 0.2% 2005 4.3% -3.2% 2006 -58.1% -27.0% 2007 71.1% 27.9% 2008 17.3% -5.1% 2009 0.9% -11.3% Calculate the variance and expected return on a portfolio that is made up of equal investments in Stock Y and Stock Z stock.

The stock market provided the following return over the last 3 years. Year Return 2016 +15...

The stock market provided the following return over the last 3 years. Year Return 2016 +15 2017 -30 2018 +35 What is the arithmetic average return? What is the geometric average return? Suppose you invested $1000 at the beginning of each of 2016,2017,2018 and withdrew all funds at the end of 2018, what is your average return (IRR)

1. Consider the following realized annual returns: Year End Index Realized Return Stock A Realized Return...

1. Consider the following realized annual returns: Year End Index Realized Return Stock A Realized Return 2006 23.6% 46.3% 2007 24.7% 26.7% 2008 30.5% 86.9% 2009 9.0% 23.1% 2010 -2.0% 0.2% 2011 -17.3% -3.2% 2012 -24.3% -27.0% 2013 32.2% 27.9% 2014 4.4% -5.1% 2015 7.4% -11.3% The average annual return on Stock A from 2006 to 2015 is closest to: 18.2% 16.40% 18.7% 29.9% 2. Use the table for the question(s) below. Consider the following average annual returns: Investment Average...

Choice Hotels Marriott International (2016/2015)-1 (2016/2015)-1 Ratios 2016 2015 2016 2015 Percent Change from 2015 to...

Choice Hotels Marriott International (2016/2015)-1 (2016/2015)-1 Ratios 2016 2015 2016 2015 Percent Change from 2015 to 2016 Percent Change from 2015 to 2016 Choice Marriott Basic earning power (BEP) ratio = earnings before interest and taxes (EBIT) / total assets 3.5 3.2 0.06 0.23 0.09 2.98 Return on equity (ROE) = net profit / total equity -0.45 -0.32 0.15 -0.24 0.41 -1.61 Return on assets (ROA) = net income / total assets 0.16 0.18 0.03 0.14 -0.08 -0.77 Profit margin...

Consider the following information on a stock and the market portfolio: For the next year, there...

Consider the following information on a stock and the market portfolio: For the next year, there will be two possible scenarios: Good and Bad. The probability of Good scenario happening is 0.6 and the probability of Bad scenario happening is 0.4. The return on the stock is 30% in Good scenario and -8% in Bad scenario. The return on the market portfolio is 20% in Good scenario and -5% in Bad scenario. Calculate the expected return for the stock and...

Bethesda Mining Company reports the following balance sheet information for 2015 and 2016. Prepare the 2015...

Bethesda Mining Company reports the following balance sheet information for 2015 and 2016. Prepare the 2015 and 2016 common-size balance sheets for Bethesda Mining. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) BETHESDA MINING COMPANY Balance Sheets as of December 31, 2015 and 2016 2015 2016 2015 2016 Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 55,526 % $ 70,205 % Accounts payable $ 188,922 %...

Question