Question
In: Finance
(Do not use excel)You are considering an investment in Stock A and Stock B. Your security...
- (Do not use excel)You are considering an investment in Stock A and Stock B. Your security analyst has estimated the returns on these two stocks as follows:
___________________________________________________________________________________
State
of
Probability
of
Return on Return on
Economy State
Occurring Stock A Stock B
___________________________________________________________________________________
Bust
0.10
–0.10 (or –10%) 0.05 (or 5%)
Normal 0.60 0.15 (or
15%)
0.10 (or 10%)
Boom 0.30 0.25 (or 25%) 0.40 (or 40%)
___ _________________________________________________________________________________
a) Find the expected return on each stock.
Use at least six decimal places when computing (b), (c), and (d) below to minimize rounding errors.
b) Compute the variance and standard deviation of returns of
each stock.
c) Find the covariance and correlation between the returns on Stock
A and Stock B.
d) Assume that you form a portfolio consisting of Stock A and Stock
B. You invest $3,000
in Stock A and $7,000 in Stock B.
i) Find the weight of each stock in the portfolio.
ii) Find the expected return and standard deviation of returns on
the portfolio
consisting of Stock A and Stock B.
Solutions
jeff jeffy answered 2 years agoRelated Solutions
(Do not use excel)You are considering an investment in Stock A and Stock B. Your security...
(Do not use excel)You are considering an investment in Stock A
and Stock B. Your security analyst has estimated the returns on
these two stocks as follows:
___________________________________________________________________________________
State
of
Probability
of
Return on Return on
Economy State
Occurring Stock A Stock B
___________________________________________________________________________________
Bust
0.10
–0.10 (or –10%) 0.05 (or 5%)
Normal 0.60 0.15 (or
15%)
0.10 (or 10%)
Boom 0.30 0.25 (or 25%) 0.40 (or 40%)
___
_________________________________________________________________________________
a) Find the expected return...
b) You are considering the two securities listed below. Stock Stock A Stock B Initial Investment...
b) You are considering the two securities listed below.
Stock
Stock A
Stock B
Initial Investment
RM25,000
RM35,000
Economy Outcomes
Probability
Stock A
Returns
Stock B
Returns
Pessimistic
20%
5%
13%
Normal
50%
10%
8%
Optimistic
30%
15%
-15%
i) Calculate the expected return for portfolio.
ii) Calculate the standard deviation of returns for
portfolio.
iii) Justify why diversification work best for these stocks.
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Solve in Excel. Show formulas
A) You are considering an investment that will pay you $12,000
the first year, $13,000 the second year, $17,000 the third year,
$19,000 the fourth year, $23,000 the fifth year, and $28,000 the
sixth year (all payments are at the end of each year).
What is the maximum you would pay for this investment if your
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B) You are considering an investment that will pay you $12,000
the first year, $13,000...
SHOW WORK ON EXCEL: You are considering an investment that will pay you $12,000 the first...
SHOW WORK ON EXCEL: You are considering an investment that will
pay you $12,000 the first year, $13,000 the second year, $17,000
the third year, $19,000 the fourth year, $23,000 the fifth year,
and $28,000 the sixth year (all payments are at the end of each
year). What is the maximum you would be willing to pay for this
investment if your opportunity cost is 11%?
Please Use Excel To Show All Work, I will like your asnwer if you do this...
Please Use Excel To Show All Work, I will like your asnwer if
you do this :)
15.35 Refer to the Johnson Filtration problem introduced in this
section. Suppose that in addition to information on the number of
months since the machine was serviced and whether a mechanical or
an electrical repair was necessary, the managers obtained a list
showing which repairperson performed the service. The revised data
follow.
Repair Time in Hours
Months Since Last Service
Type of Repair...
show Excel ( show all work including formulars ) You are considering an investment in the...
show Excel ( show all work including formulars
)
You are considering an investment in the stock market and have
identified two potential stocks, they are Westpac Banking Corp.
(ASX: WBC) and Singapore Airlines Ltd. (SGX: C6L). The historical
prices for the past 10 years are shown in the table below.
in the table below.
Year
ASX: WBC
SGX: C6L
2009
23.70
13.82
2010
22.85
14.76
2011
21.01
11.1
2012
27.85
10.99
2013
30.66
9.59
2014
34.23
12.65
2015
30.85...
Your firm is considering investment projects, A, B, and C. Given the budget constraints, you must...
Your firm is considering investment projects, A, B, and C. Given
the budget constraints, you must choose either A or B, but not
both.
Project A will provide a net return of either $40, $50, or $60,
respectively, depending on whether there will be a recession,
normal conditions, or a boom. The figures for Project B are $20,
$30, or $80, respectively.
Project C’s figures are: $30, $40, or $70, respectively.
Forecasts indicate that, given the current trends in appropriate...
PLEASE DO NO USE EXCEL, as we are not able to use excel on our test...
PLEASE DO NO USE EXCEL, as we are not able to use excel on our
test
XYZ company is considering a new machine that costs $300,000 and
would reduce pre-tax manufacturing costs by $108,000 annually. XYZ
would use the 3-year MACRS method to depreciate the machine, and
management thinks the machine would have a value of $23,000 at the
end of its 5-year operating life. The applicable depreciation rates
are 33%, 45%, 15%, and 7%. The net operating working capital...
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