Question
In: Finance
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 the expected T-bill is 3.75 percent, what is the expected risk premium on the portfolio?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Consider the following information on a portfolio of three stocks: State of Economy Probability of State...
Consider the
following information on a portfolio of three stocks:
State of
Economy
Probability
of
State of Economy
Stock A
Rate of Return
Stock B
Rate of Return
Stock C
Rate of Return
Boom
.15
.04
.33
.55
Normal
.60
.09
.13
.19
Bust
.25
.15
–.14
–.28
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? (Do not...
Consider the following information on a portfolio of three stocks: State of Probability of Stock A...
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
.09
.34
.53
Normal
.53
.17
.19
.27
Bust
.35
.18
−
.18
−
.37
a. If your portfolio is invested 36 percent
each in A and B and 28 percent in C, what is the portfolio’s
expected return, the variance, and the standard deviation?...
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...
Type or paste question here Consider the following information on a portfolio of three stocks: State...
Type or paste question here
Consider the
following information on a portfolio of three stocks:
State of
Economy
Probability
of
State of Economy
Stock A
Rate of Return
Stock B
Rate of Return
Stock C
Rate of Return
Boom
.13
.04
.34
.58
Normal
.53
.12
.14
.22
Bust
.34
.18
–.13
–.37
a.
If your portfolio is
invested 36 percent each in A and B and 28 percent in C, what is
the portfolio’s expected return, the variance, and...
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...
1.Returns and Standard Deviations Consider the following information: State of Economy Probability of State of Economy...
1.Returns
and Standard Deviations Consider the following
information:
State of Economy
Probability of State of Economy
Rate of Return If State Occurs
Stock A
Stock B
Stock C
Boom
.10
.35
.45
.27
Good
.60
.16
.10
.08
Poor
.25
?.01
?.06
?.04
Bust
.05
?.12
?.20
?.09
Your portfolio is invested 30 percent each in A and C, and 40
percent in B. What is the expected return of the portfolio?
What is the variance of this portfolio? The...
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....
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Consider a buffer system consisting of Benzoic acid (pKa = 4.20) and sodium benzoate, a) Would...
- Decision Variables S T Minimize 1.8S + 2.20T Subject to: Potassium 5S + 8T >= 200...
- A neurologist needs to counsel a stroke victim and her husband about possible outcomes, treatment options,...
- Case Study: Personal Beliefs in the Workplace Don Shakow was a prominent professional who worked in...
- 1: Competency framework usage is the modern best practice in management. What is meant by competency...
- A 19.34 g mixture of sugar (C12H22O11) and table salt (NaCl) is dissolved in 231 g...
- Young and Company claims that its pressurized diving bell will, on average, maintain its integrity to...
ADVERTISEMENT