Question
In: Finance
Problem 11-28 Portfolio Standard Deviation Suppose the expected returns and standard deviations of Stocks A and...
Problem 11-28 Portfolio Standard Deviation
|
Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .091, E(RB) = .151, σA = .361, and σB = .621. |
| a-1. |
Calculate the expected return of a portfolio that is composed of 36 percent A and 64 percent B when the correlation between the returns on A and B is .51. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Expected return | % |
| a-2. |
Calculate the standard deviation of a portfolio that is composed of 36 percent A and 64 percent B when the correlation between the returns on A and B is .51. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Standard deviation | % |
| b. |
Calculate the standard deviation of a portfolio with the same portfolio weights as in part (a) when the correlation coefficient between the returns on A and B is −.51. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Standard deviation | % |
Solutions
jeff jeffy answered 2 days agoRelated Solutions
Portfolio Standard DeviationSuppose the expected returns and standard deviations of Stocks A and B are E(RA)...
Portfolio Standard DeviationSuppose the expected returns and
standard deviations of Stocks A and B are E(RA) = .11, E(RB) = .13,
σA = .47, and σB = .81. a.Calculate the expected return and
standard deviation of a portfolio that is composed of 40 percent A
and 60 percent B when the correlation between the returns on A and
B is .5. b.Calculate the standard deviation of a portfolio with the
same portfolio weights as in part (a) when the correlation...
What is the standard deviation of the returns on a portfolio that is invested in stocks...
What is the standard deviation of the returns on a portfolio
that is invested in stocks A, B, and C? 20 percent of the portfolio
is invested in stock A and 45 percent is invested in stock C.
State of Economy
Boom Normal Bust
Probability of Returns if State Occurs
State of Economy Stock A Stock B Stock C 20% 9% 3% 11%
55%4%5%8% 25% -2% 10% -13%
What are the expected returns of the two stocks? b. What are the standard deviations of...
What are the expected returns of the two stocks? b. What are
the standard deviations of the returns of the two stocks? c. If
their correlation is 0.43, what is the expected return and
standard deviation of a portfolio of 58% stock A and 42% stock
B? a. What are the expected returns of the two stocks?
Stock A Stock B
1 0.09 0.06
2 0.04 0.02
3 0.15 0.03
4 -0.04 0.01
5 0.09 -0.05
Stocks A and B have the expected returns and standard deviations shown in the table below:...
Stocks A and B have the expected returns and standard deviations
shown in the table below: Asset E(R) Std. deviation A 15% 30% B 20%
50% The correlation between A and B is 0.6. The risk-free rate is
3% and you have a risk-aversion parameter of 2. What is the
proportion of your investment in A and B, respectively, in your
optimal risky portoflio? A. 25.0% in A ; 75.0% in B B. 76.6% in A;
23,4% in B C....
Stocks A and B have expected returns of 8% and 10%, and standard deviations of 12%...
Stocks A and B have expected returns of 8% and 10%, and standard
deviations of 12% and 18%, respectively. Calculate the expected
return and standard deviation of equally weighted portfolios of the
two stocks if the correlation between the two stocks is 0.5? Repeat
the calculation for correlation of 0 and -0:5. If you could set the
correlation between the two stocks, which of the three values would
you choose? Explain.
Problem 11-13 More Portfolio Variance (LO4, CFA3) The expected return and standard deviation of a portfolio...
Problem 11-13 More Portfolio Variance (LO4, CFA3)
The expected return and standard deviation of a portfolio that
is 30 percent invested in 3 Doors, Inc., and 70 percent invested in
Down Co. are the following:
3 Doors, Inc.
Down Co.
Expected return, E(R)
13
%
12
%
Standard deviation, σ
56
36
What is the standard deviation if the correlation is +1? 0? −1?
(Do not round intermediate calculations. Enter your answer
as a percent rounded to 2 decimal places....
1. What is the expected standard deviation of the returns of a portfolio that is invested...
1. What is the expected standard deviation of the returns of a
portfolio that is invested 25 percent in Stock A, 40 percent in
Stock B, and the remainder invested in Stock C? (Hint: create a
column showing the distribution of returns for the portfolio. Then,
find the portfolio's expected return and variance as normally done
for a single asset.)
State of Economy
Probability
Return of A
Return of B
Return of C
Boom
0.20
29%
15%
6%
Normal
0.50...
What is the standard deviation of the returns on a $40,000 portfolio which consists of stocks...
What is the standard deviation of the returns on a $40,000
portfolio which consists of stocks C and D? Stock C is valued at
$22,000.
State of
Economy
Probability of
State of Economy
Returns if State Occurs
Stock C
Stock D
Boom
20%
15%
4%
Normal
70%
9%
6%
Recession
10%
-2%
5%
Problem 11-25 Portfolio Returns and Deviations [LO 1, 2] Consider the following information on a portfolio...
Problem 11-25 Portfolio Returns and Deviations [LO 1, 2]
Consider the following information on a portfolio of three
stocks:
State of
Probability of
Stock A
Stock B
Stock C
Economy
State of Economy
Rate of Return
Rate of Return
Rate of Return
Boom
.12
.11
.36
.41
Normal
.51
.19
.31
.29
Bust
.37
.20
?
.30
?
.39
a. If your portfolio is invested 44 percent
each in A and B and 12 percent in C, what is the...
Problem 11-25 Portfolio Returns and Deviations [LO 1, 2] Consider the following information on a portfolio...
Problem 11-25 Portfolio Returns and Deviations [LO 1, 2]
Consider the following information on a portfolio of three
stocks:
State of
Probability of
Stock A
Stock B
Stock C
Economy
State of Economy
Rate of Return
Rate of Return
Rate of Return
Boom
.15
.02
.32
.60
Normal
.55
.10
.12
.20
Bust
.30
.16
−
.11
−
.35
a. If your portfolio is invested 40 percent
each in A and B and 20 percent in C, what is the...
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