Question
In: Finance
Consider the following 6 months of returns for 2 stocks and a portfolio of those 2...
Consider the following 6 months of returns for 2 stocks and a portfolio of those 2 stocks:
|
Jan |
Feb |
Mar |
Apr |
May |
Jun |
|
||||||||||||||||
|
Stock A |
2% |
5% |
−6% |
3% |
−2% |
4% |
||||||||||||||||
|
Stock B |
0% |
−3% |
8% |
−1% |
4% |
−2% |
||||||||||||||||
|
Portfolio |
1% |
1% |
1% |
1% |
1% |
11% |
||||||||||||||||
The portfolio is composed of 50% of Stock A and 50% of Stock B.
a. What is the expected return and standard deviation of returns for each of the two stocks?
b. What is the expected return and standard deviation of returns for the portfolio?
c. Is the portfolio more or less risky than the two stocks? Why?
a. What is the expected return and standard deviation of returns for each of the two stocks?
The expected return of Stock A is___? (Round to one decimal place.)
Solutions
Expert Solution
ALL STATISTICAL CALCULATIONS, NO EXCEL FUNCTION IS
USED.
jeff jeffy answered 1 month agoRelated Solutions
Consider the following 6 months of returns for 2 stocks and a portfolio of those 2stocks:...
Consider the following 6 months of returns for 2 stocks and a
portfolio of those 2stocks:
Note: The portfolio is composed of 50% of
Stock A and 50% of Stock B.
jan
feb
mar
apr
may
jun
stock a
3%
6%
-5%
4%
-1%
5%
stock b
0%
-3%
8%
-1%
4%
-2%
portfolio
1.5%
1.5%
1.5%
1.5%
1.5%
1.5%
What is the expected return and standard deviation of returns
for each of the two stocks?
0.00176; 0.00176
0.04195; 0.04195
0.05985;...
Portfolio returns and deviations. Consider the following information on a portfolio of three stocks: State of...
Portfolio returns and deviations. Consider the following
information on a portfolio of three stocks:
State of
Probability
of
Stock A Rate of return Stock B
ROR Stock C ROR
Economy
State of Economy
Boom
.15
.02
.32
.60
Normal
.60
.10
.12
.20
Bust
.25
.16
-.11
-.35
a. If your portfolio is invested 40 percent each in A and B and
20 percent in C, what is the portfolio's expected return? the
variance? the standard deviation?
b. if...
Consider the following information on a portfolio of three stocks: &
Consider the following information on a portfolio of three
stocks:
Rate of Return
State of
Economy
Probability of
State Occurring
Stock A
(%)
Stock B
(%)
Stock C
(%)
Boom
.15
7
15
28
Normal
.70
9
12
17
Bust
.15
10
2
−35
The portfolio is invested 40 percent in each of Stock A and
Stock B and the rest in Stock C.
Which of the three stocks has the lowest risk? Why?
What is the expected return...
Consider the following information on a portfolio of three stocks: &
Consider the following information on a portfolio of three
stocks:
Rate of Return
State of
Economy
Probability of
State Occurring
Stock A
(%)
Stock B
(%)
Stock C
(%)
Boom
.05
7
15
28
Normal
.80
9
12
17
Bust
.15
10
2
−35
The portfolio is invested 40 percent in each of Stock A and
Stock B and the rest in Stock C.
Which of the three stocks has the lowest risk? Why?
What is the expected return...
The following monthly returns were observed on a security over 6 consecutive months: 5%, 2%, 6%,...
The following monthly returns were observed on a security
over 6 consecutive months: 5%, 2%, 6%, -4%, 0% and 3%.
What is the effective annual difference between the 6month
geometric return and the 6-month arithmetic return?
Consider the following information for three stocks, Stocks A, B, and C. The returns on the...
Consider the following information for three stocks, Stocks A,
B, and C. The returns on the three stocks are positively
correlated, but they are not perfectly correlated. (That is, each
of the correlation coefficients is between 0 and 1.)
Stock
Expected Return
Standard Deviation
Beta
A
7.94
16
0.7
B
9.62
16
1.1
C
11.72
16
1.6
Fund P has one-third of its funds invested in each of the three
stocks. The risk-free rate is 5%, and the market is...
Consider the following information for Stocks A, B, and C. The returns on the three stocks...
Consider the following information for Stocks A, B, and C. The
returns on the three stocks are positively correlated, but they are
not perfectly correlated. (that is, each of the correlation
coefficients is between 0 and 1).
Stock Expected Return Standard Deviation Beta
A 9.55% 15.00% 0.9
B 10.45% 15.00% 1.1
C 12.70% 15.00% 1.6
Fund P has one-third of its funds invested in each of the
three stocks. The risk-free rate is 5.5%, and the market is in
equilibrium....
Consider the following information for stocks A, B, and C. The returns on the three stocks...
Consider the following information for stocks A, B, and C. The
returns on the three stocks are positively correlated, but they are
not perfectly correlated. (That is, each of the correlation
coefficients is between 0 and 1.)
Stock
Expected Return
Standard Deviation
Beta
A
9.35%
15%
0.7
B
12.65
15
1.3
C
14.85
15
1.7
Fund P has one-third of its funds invested in each of the three
stocks. The risk-free rate is 5.5%, and the market is in
equilibrium....
Consider the following information for stocks A, B, and C. The returns on the three stocks...
Consider the following information for stocks A, B, and C. The
returns on the three stocks are positively correlated, but they are
not perfectly correlated. (That is, each of the correlation
coefficients is between 0 and 1.)
Stock
Expected Return
Standard Deviation
Beta
A
8.65%
16%
0.7
B
10.45
16
1.1
C
12.25
16
1.5
Fund P has one-third of its funds invested in each of the three
stocks. The risk-free rate is 5.5%, and the market is in
equilibrium....
Consider the following information for stocks A, B, and C. The returns on the three stocks...
Consider the following information for stocks A, B, and C. The
returns on the three stocks are positively correlated, but they are
not perfectly correlated. (That is, each of the correlation
coefficients is between 0 and 1.)
Stock
Expected Return
Standard Deviation
Beta
A
8.75%
14%
0.9
B
9.75
14
1.3
C
10.75
14
1.7
Fund P has one-third of its funds invested in each of the three
stocks. The risk-free rate is 6.5%, and the market is in
equilibrium....
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