Question
In: Finance
City Probability Occurrence Bond X Returns Bond Z Returns Portfolio Returns 50%X, 50%Z Bam 25% 3%...
| City | Probability Occurrence | Bond X Returns | Bond Z Returns | Portfolio Returns 50%X, 50%Z |
| Bam | 25% | 3% | -2% | |
| Medium | 50% | 4% | -1% | |
| Depression | 25% | -5% | 6% |
Suppose a two-stock portfolio is created with 50% invested in bond X and 50% invested in bond Z.
Determine the portfolio returns in each city.
Determine the expected rate of returns for bond X, bond Z, and the
Portfolio.
Determine the standard deviations for bond X, bond Z, and the
Portfolio
Solutions
jeff jeffy answered 4 months agoRelated Solutions
What is the correlation between stocks X and Z? State of the Economy Probability of Occurrence...
What is the correlation between stocks X and Z?
State of the Economy
Probability of Occurrence
Stock X
Expected Return
Stock Y
Expected Return
Stock Z
Expected Return
Recession
35%
25%
-10%
15%
Average
45%
14%
8%
25%
Boom
20%
4%
14%
-10%
0.96
0.51
-0.26
0.26
Calculate E(rxy) for (50%X + 50%Y) portfolio E(rxz) for (50%X + 50%Z) portfolio from the following...
Calculate E(rxy) for (50%X + 50%Y) portfolio
E(rxz) for (50%X + 50%Z) portfolio from the following
data:
E(rxy)
E(rxz)
(50%X + 50%Y) (50%X + 50%Z)
Yr (t)
E(rx)
E(ry) E(rz)
2012
8.0 24.0
8.0
2013
10.0 20.0 12.0
2014
12.0 16.0 16.0
2015
14.0 12.0 20.0
2016
16.0 8.0
24.0
...
Consider the following information on returns and probabilities: State Probability X Z Boom .25 15% 10%...
Consider the following information on returns and
probabilities:
State Probability X
Z
Boom .25 15% 10%
Normal .60 10% 9%
Recession .15 5% 10%
• Use a spreadsheet application (Excel Worksheet) to compute the
following:
1) expected return and standard deviation for a Fund-X
2) expected return and standard deviation for a Fund-Z
3) portfolio return if an investment of $6,000 in Fund X and
$4,000 in Fund Z
4) portfolio risk based on an investment of $6,000 in Fund...
Consider the following: Returns Scenario Probability Auto Gold Portfolio (75% auto, 25% gold) Recession 1/3 -8...
Consider the following:
Returns
Scenario
Probability
Auto
Gold
Portfolio (75% auto, 25% gold)
Recession
1/3
-8
+20
.75(-8) + .25 (20) = -1.0%
Normal
1/3
+5
+3
.75(5) + .25 (3) = +4.5%
Boom
1/3
+18
-20
.75(18) + .25 (-20) = +8.5%
Expected Return
Auto
(-8+5+18)/3 = 5%
Gold
(+20+3-20)/3 = 1%
Portfolio
(-1+4.5+8.5)/3 = 4%
Variance
Auto
(169+0+169)/3 = 112.7 (std. 10.6%)
Gold
(361+4+441)/3 = 268.7 (std. 16.4%)
Portfolio
(25+.25 +20.25)/3 = 15.2 (std 3.9%)
Homework:
1) Show...
State of the world Probability Security Returns X Security Returns Market Boom .30 .25 .15 Normal...
State of
the world
Probability
Security Returns X
Security Returns Market
Boom
.30
.25
.15
Normal
.40
.07
.10
Recession
.30
.03
.05
E(Rx).112
E(RMkt).10
=.008436
=.0015
Is this distribution symmetrical? Calculate the covariance.
Calculate the variance of the portfolio made up of 30% X and 70% of
the Market. Find the Beta for the firm. Find the correlation
coefficient. What does the beta measure?
Assuming the beta calculated above, and assuming E(RM) = 12%;
Rf= 8% Find the price...
The possible outcomes for the returns on Stock X and the returns on the market portfolio...
The possible outcomes for the returns on Stock X and the returns
on the market portfolio have been estimated as follows:
Scenario
Stock X
Market Portfolio
1
-3%
6%
2
14%
12%
3
22%
18%
A) 2.1
B) 0.7
C) 1.0
D) none of the above
The possible outcomes for the returns on Stock X and the returns on the market portfolio...
The possible outcomes for the returns on Stock X and the returns
on the market portfolio have been estimated as follows:
Scenario
Stock X
Market portfolio
1
-3%
6%
2
14%
12%
3
22%
18%
Calculate the market beta for Stock X. Round your answer to the
nearest tenth.
A) 2.1
B) 0.7
C) 1.0
D) none of the above
The possible outcomes for the returns on Stock X and the returns on the market portfolio...
The possible outcomes for the returns on Stock X and the returns
on the market portfolio have been estimated as
follows:
Scenario
Stock X
Market
portfolio
1
9%
10%
2
21%
13%
3
13%
11%
Each scenario is considered to be equally likely to occur.
Calculate the covariance of the returns of Stock X and the market
portfolio.
A) 0.03%
B) 0.57%
C)
1.62%
D) 0.06%
An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures...
An investor has two bonds in her portfolio, Bond C and Bond Z.
Each bond matures in 4 years, has a face value of $1,000, and has a
yield to maturity of 9.2%. Bond C pays a 10% annual coupon, while
Bond Z is a zero coupon bond.
a. Assuming that the yield to maturity of each bond remains at
9.2% over the next 4 years, calculate the price of the bonds at
each of the following years to maturity....
An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures...
An investor has two bonds in her portfolio, Bond C and Bond Z.
Each bond matures in 4 years, has a face value of $1,000, and has a
yield to maturity of 9.3%. Bond C pays a 12% annual coupon, while
Bond Z is a zero coupon bond. Assuming that the yield to maturity
of each bond remains at 9.3% over the next 4 years, calculate the
price of the bonds at each of the following years to maturity.
Round...
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