Question
In: Accounting
The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 8...
The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 8 % 1.00 28 % B 16 1.60 40 The market index has a standard deviation of 25% and the risk-free rate is 9%.
a. What are the standard deviations of stocks A and B? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
b. Suppose that we were to construct a portfolio with proportions:
Stock A 0.25 Stock B 0.50 T-bills 0.2
5 Compute the expected return, standard deviation, beta, and nonsystematic standard deviation of the portfolio. (Do not round intermediate calculations. Enter your answer for Beta as a number, not a percent. Round your answers to 2 decimal places.)
Solutions
Expert Solution
Calculation of Standard deviation of Stock A & B
Calculation of Expected retun of Portfolio & Beta of portfolio
Calculation of Variance & Standard deviation
Working Note 1 for Reference to Calculation of Variance
Please feel free to reach or comment back if you need further clarity or something is missing.
ekkarill92 answered 2 years agoRelated Solutions
The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 10...
The following are estimates for two stocks.
Stock
Expected Return
Beta
Firm-Specific Standard Deviation
A
10
%
1.00
35
%
B
16
1.50
44
The market index has a standard deviation of 21% and the risk-free
(T-Bills are risk free) rate is 12%.
a. What are the standard deviations of stocks
A and B? (Do not round intermediate
calculations. Round your answers to 2 decimal
places.)
b. Suppose that we were to construct a portfolio
with proportions:
Stock A
0.25...
The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 10...
The following are estimates for two stocks. Stock Expected
Return Beta Firm-Specific Standard Deviation A 10 % 0.70 28 % B 18
1.25 42 The market index has a standard deviation of 22% and the
risk-free rate is 7%. a. What are the standard deviations of stocks
A and B? (Do not round intermediate calculations. Round your
answers to 2 decimal places.) b. Suppose that we were to construct
a portfolio with proportions: Stock A 0.35 Stock B 0.35 T-bills...
The following are estimates for two stocks. Stock Expected Return Beta firm-specific Standard Deviation A 0.14...
The following are estimates for two stocks.
Stock
Expected Return
Beta
firm-specific Standard Deviation
A
0.14
0.67
0.25
B
0.20
1.21
0.37
The market index has a standard deviation of 0.21 and the risk-free
rate is 0.09.
Suppose that we were to construct a portfolio with
proportions:
Stock A 0.31
Stock B 0.42
The remaining proportion is invested in T-bills.
Compute the nonsystematic standard deviation of the portfolio.
Round your answer to 4 decimal places. For example if your
answer...
The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 12...
The following are estimates for two stocks.
Stock
Expected Return
Beta
Firm-Specific Standard Deviation
A
12
%
0.65
26
%
B
20
1.15
36
The market index has a standard deviation of 20% and the
risk-free rate is 7%.
a. What are the standard deviations of stocks
A and B? (Do not round intermediate
calculations. Round your answers to 2 decimal
places.)
b. Suppose that we were to construct a
portfolio with proportions:
Stock A
0.40
Stock B
0.40
T-bills...
The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 11...
The following are estimates for two stocks.
Stock
Expected Return
Beta
Firm-Specific Standard Deviation
A
11
%
0.90
32
%
B
16
1.40
40
The market index has a standard deviation of 19% and the
risk-free rate is 11%.
a. What are the standard deviations of stocks
A and B? (Do not round intermediate
calculations. Round your answers to 2 decimal
places.)
b. Suppose that we were to construct a
portfolio with proportions:
Stock A
0.40
Stock B
0.40
T-bills...
The following are estimates for 2 stocks. Stock Expected ret. beta firm-specific variance, or Var(e) A...
The following are estimates for 2 stocks.
Stock
Expected ret.
beta
firm-specific variance, or Var(e)
A
13%
0.6
0.4
B
18%
0
0.35
The market index has a standard deviation of 0.13, and the
risk-free rate if 0.03
What is the standard deviation of stock A's
return?
What is the standard deviation of stock B's
return?
Please round both answers to 4 decimal places.
Stock A has an annual expected return of 8%, a beta of .9, and a firm-specific...
Stock A has an annual expected return of 8%, a beta of .9, and a
firm-specific volatility of 50% Stock B has an annual expected
return of 9%, a beta of 1.3, and a firm-specific volatility of 40%
The market has a standard deviation of 20%, and the risk-free rate
is is 2%.
What is the volatility of stock A? (in %, round to 1 decimal
place)
Suppose we construct a portfolio built out of 50% stock A, 30%
stock...
What is the Standard deviation ? Consider two stocks, Stock D, with an expected return of...
What is the Standard deviation ? Consider two stocks, Stock D,
with an expected return of 13 percent and a standard deviation of
31 percent, and Stock I, an international company, with an expected
return of 16 percent and a standard deviation of 42 percent. The
correlation between the two stocks is –0.10. What are the expected
return and standard deviation of the minimum variance portfolio?
(Do not round intermediate calculations. Enter your answer as a
percent rounded to 2...
Consider two stocks, Stock D, with an expected return of 20 percent and a standard deviation...
Consider two stocks, Stock D, with an expected return of 20
percent and a standard deviation of 35 percent, and Stock I, an
international company, with an expected return of 8 percent and a
standard deviation of 23 percent. The correlation between the two
stocks is −.21. What are the expected return and standard deviation
of the minimum variance portfolio? (Do not round
intermediate calculations. Enter your answer as a percent rounded
to 2 decimal places.)
Consider two stocks, Stock D, with an expected return of 17 percent and a standard deviation...
Consider two stocks, Stock D, with an expected return of 17
percent and a standard deviation of 32 percent, and Stock I, an
international company, with an expected return of 10 percent and a
standard deviation of 20 percent. The correlation between the two
stocks is −.18. What are the expected return and standard deviation
of the minimum variance portfolio? (Do not round
intermediate calculations. Enter your answer as a percent rounded
to 2 decimal places.
Expected return
28.95
%...
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