Question
In: Finance
You are given the following information about Stocks A and B: Rate of Return if State...
You are given the following information about Stocks A and B:
|
Rate of Return if State Occurs |
|||
|
State of Economy |
Probability of |
Stock A |
Stock B |
|
Boom |
0.30 |
22% |
17% |
|
Normal |
0.50 |
16% |
7% |
|
Recession |
0.20 |
-3% |
2% |
Stock A has a beta of 1.5 and Stock B has a beta of 1.2.
- What is the beta of a portfolio consisting of 60% of Stock A and 40% of Stock B?
- What is the expected return of a portfolio consisting of 60% of Stock A and 40% of Stock B?
- Which stock has a greater return variance?
Solutions
jeff jeffy answered 15 hours agoRelated Solutions
Consider the following information about Stocks A and B: Rate of Return if State Occurs State...
Consider the following information about Stocks A and B: Rate of
Return if State Occurs State of Probability of Economy State of
Economy Stock A Stock B Recession 0.26 0.03 − 0.34 Normal 0.56 0.20
0.14 Irrational exuberance 0.18 0.09 0.54 The market risk premium
is 5 percent, and the risk-free rate is 3 percent. (Round your
answers to 2 decimal places. (e.g., 32.16)) The standard deviation
on Stock A's return is percent, and the Stock A beta is ....
Consider the following information about three stocks: Rate of Return If State Occurs State of...
Consider the following
information about three stocks:
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.20
.38
.50
.50
Normal
.55
.16
.14
.12
Bust
.25
.00
?.30
?.50
a-1
If your portfolio is invested 30 percent each in A and B and 40
percent in C, what is the portfolio expected return? (Do
not round intermediate calculations. Enter your answer as a percent
rounded...
Consider the following information about three stocks: Rate of Return If State Occurs State of...
Consider the following information about three stocks:
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.26
.32
.44
.56
Normal
.50
.13
.11
.09
Bust
.24
.04
−.25
−.45
a-1
If your portfolio is invested 40 percent each in A and B and 20
percent in C, what is the portfolio expected return? (Do
not round intermediate calculations. Enter your answer as a percent
rounded...
Consider the following information about three stocks: Rate of Return If State Occurs State of...
Consider the following information about three stocks:
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.20
.28
.40
.56
Normal
.45
.22
.20
.18
Bust
.35
.00
−.20
−.48
a-1.
If your portfolio is invested 30 percent each in A and B and 40
percent in C, what is the portfolio expected return? (Do
not round intermediate calculations and enter your answer as a
percent...
Consider the following information about three stocks: Rate of Return If State Occurs State of...
Consider the following information about three stocks:
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.20
.26
.38
.50
Normal
.50
.10
.08
.06
Bust
.30
.01
−.20
−.40
a-1
If your portfolio is invested 30 percent each in A and B and 40
percent in C, what is the portfolio expected return? (Do
not round intermediate calculations. Enter your answer as a percent
rounded...
Consider the following information about three stocks: Rate of Return If State Occurs State of...
Consider the following information about three stocks:
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.20
.28
.40
.56
Normal
.45
.22
.20
.18
Bust
.35
.00
−.20
−.48
a-1
If your portfolio is invested 30 percent each in A and B and 40
percent in C, what is the portfolio expected return? (Do
not round intermediate calculations. Enter your answer as a percent
rounded...
Consider the following information about Stocks I and II: Rate of Return if State Occurs State...
Consider the following information about Stocks I and II:
Rate of Return if State Occurs
State of
Probability of
Economy
State of Economy
Stock I
Stock II
Recession
.26
.05
−
.31
Normal
.50
.22
.11
Irrational exuberance
.24
.05
.51
The market risk premium is 5 percent, and the risk-free rate is
3 percent.
The standard deviation on Stock I's expected return
is______percent, and the Stock I beta is_____.The standard
deviation on Stock II's expected return is______percent, and the...
Consider the following information about Stocks I and II: Rate of Return If State Occurs State...
Consider the following information about Stocks I and II: Rate
of Return If State Occurs State of Probability of Economy State of
Economy Stock I Stock II Recession .30 .04 ?.19 Normal .50 .16 .06
Irrational exuberance .20 .05 .39 The market risk premium is 8
percent, and the risk-free rate is 5 percent. (Do not round
intermediate calculations. Round your answers to 2 decimal places,
e.g., 32.16. Enter your return answers as a percent. ) The standard
deviation on...
Consider the following information about Stocks I and II: Rate of Return If State Occurs State...
Consider the following information about Stocks I and II: Rate
of Return If State Occurs State of Probability of Economy State of
Economy Stock I Stock II Recession .30 .08 −.27 Normal .45 .19 .14
Irrational exuberance .25 .13 .47 The market risk premium is 8
percent, and the risk-free rate is 6 percent. (Do not round
intermediate calculations. Enter your standard deviation answers as
a percent rounded to 2 decimal places, e.g., 32.16. Round your beta
answers to 2...
You have been given the following information: Rate of Return If State Occurs State of...
You have been given the following information:
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Recession
.16
.05
−
.16
Normal
.62
.08
.13
Boom
.22
.13
.30
a.
Calculate the expected return for the two stocks. (Do
not round intermediate calculations and enter your answers as a
percent rounded to 2 decimal places, e.g., 32.16.)
b.
Calculate the standard deviation for the two stocks.
(Do not round...
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