Question
In: Accounting
You are considering an investment in the stock market and have identified two potential stocks, they...
You are considering an investment in the stock market and have identified two potential stocks, they are Rio Tinto (NYSE: RIO) and Amazon (NASDAQ: AMZN). The historical prices for the past 10 years are shown in the table below. Year Rio Tinto Amazon 2010 48.51 125.41 2011 69.48 169.64 2012 60.46 194.44 2013 56.47 264.27 2014 53.15 358.69 2015 44.13 354.53 2016 24.65 587.00 2017 44.79 823.48 2018 56.11 1450.89 1. Which stocks would you prefer to own? Would everyone make the same choice? Explain your answer(s). 2. Calculate the correlation coefficient between the two stocks. Does it appear that a portfolio consisting of RIO and AMZN would provide good diversification? Explain your answer(s). 3. Calculate the expected (annual) return and standard deviation if you owned a portfolio consisting of 80% in AMZN and 20% in RIO
Please answer using manual calculations and show calculations for each question and not on excel Please
Solutions
ekkarill92 answered 1 year agoRelated Solutions
You are considering an investment in the stock market and have identified two potential stocks
Risk and return You are considering an investment in the stock market and have identified two potential stocks, they are Rio Tinto (NYSE: RIO) and Amazon (NASDAQ: AMZN). The year-end historical prices for the years 2010 to 2018 are shown in the table below. YearRio TintoAmazon201048.51125.41201169.48169.64201260.46194.44201356.47264.27201453.15358.69201544.13354.53201624.65587.00201744.79823.48201856.111450.891. Which stocks would you prefer to own? Would every rational investor make the same choice? Explain your answer(s). 2. Calculate the covariance and correlation coefficient between the two stocks. Does it appear that a portfolio consisting of...
You are considering an investment in the stock market and have identified three potential stocks, they...
You are considering an investment in the stock market and have
identified three potential stocks, they are Crown (ASX: CWN),
Tencent (HKG: 0700) and Commonwealth Bank (ASX: CBA). The
historical prices for the past 10 years are shown in the table
below. Assume no dividend is distributed during
this period.
Year
Crown
Tencent
Commonwealth (CBA)
2010
7.76
29.04
53.63
2011
8.57
40.40
52.15
2012
8.09
37.94
50.39
2013
11.59
54.28
64.10
2014
16.68
108.70
73.83
2015
13.61
132
88.85
2016...
Risk and return You are considering an investment in the stock market and have identified two...
Risk and return You are considering an investment in the stock
market and have identified two potential stocks, they are Westpac
Banking Corp. (ASX: WBC) and Singapore Airlines Ltd. (SGX: C6L).
The historical prices for the past 10 years are shown in the table
below.
Year
ASX:WBC
SGX:C6L
2011
23.70
13.82
2012
22.85
14.76
2013
21.01
11.1
2014
27.85
10.99
2015
30.85
11.03
2016
31.71
9.90
2017
30.96
11.31
2018
24.55
9.65
1. Which stocks would you prefer to own?...
Risk and return You are considering an investment in the stock market and have identified three...
Risk and return
You are considering an investment in the stock market and have
identified three potential stocks, they are Crown (ASX: CWN),
Tencent (HKG: 0700), and Commonwealth Bank (ASX: CBA). The
historical prices for the past 10 years are shown in the table
below. Assume no dividend is distributed during
this period.
Year
Crown
Tencent
Commonwealth (CBA)
2010
7.76
29.04
53.63
2011
8.57
40.40
52.15
2012
8.09
37.94
50.39
2013
11.59
54.28
64.10
2014
16.68
108.70
73.83
2015
13.61...
Risk and return You are considering an investment in the stock market and have identified three...
Risk and return
You are considering an investment in the stock market and have
identified three potential stocks, they are Crown (ASX: CWN),
Tencent (HKG: 0700) and Commonwealth Bank (ASX: CBA). The
historical prices for the past 10 years are shown in the table
below. Assume no dividend is distributed during
this period.
Year
Crown
Tencent
Commonwealth (CBA)
2010
7.76
29.04
53.63
2011
8.57
40.40
52.15
2012
8.09
37.94
50.39
2013
11.59
54.28
64.10
2014
16.68
108.70
73.83
2015
13.61...
Risk and return You are considering an investment in the stock market and have identified three...
Risk and return
You are considering an investment in the stock market and have
identified three potential stocks, they are Crown (ASX: CWN),
Tencent (HKG: 0700), and Commonwealth Bank (ASX: CBA). The
historical prices for the past 10 years are shown in the table
below. Assume no dividend is distributed during
this period.
Year
Crown
Tencent
Commonwealth (CBA)
2010
7.76
29.04
53.63
2011
8.57
40.40
52.15
2012
8.09
37.94
50.39
2013
11.59
54.28
64.10
2014
16.68
108.70
73.83
2015
13.61...
You are considering two stocks and have determined the following information: Stock A Return Probability of...
You are considering two stocks and have determined the following
information: Stock A Return Probability of the Return 21 % 50 % 12
10 5 40 Stock B Return Probability of the Return 32 % 10 % 15 60 8
30 Which of the two stocks has the higher expected return? Round
your answers to two decimal places. The return on Stock A: % The
return on Stock B: % has the higher expected return. Which stock is
riskier? Do...
You are the investment manager of a Stock Fund. You have the following three stocks in...
You are the investment manager of a Stock Fund.
You have the following three stocks in portfolio (Eli
SuperMarkets (ESM), Kean Luxury Clothing (KLC) and Eds Financial
Services (ESF)) and now you need to re-evaluate your positions and
make decisions to either buy, hold, sell or maybe even short these
stocks.
Please answer the following questions. Use the information
mentioned at the bottom of this page.
What is the fair value of stock ESM? Explain/Show
Calculations.
Stock 1 – Eli...
You are considering investing in two common stocks holding them in a two-stock portfolio. Stock A...
You are considering investing in two common stocks holding them
in a two-stock portfolio. Stock A has an expected return of 10% and
a standard deviation of 11.2%. Stock B has an expected return of
16% and a standard deviation of 41.1%. if you invest 34% of your
portfolio in Stock A and 66% in Stock B and if the correlation
between the two stocks is 0.57, what is the portfolio's expected
return and standard deviation?
A.
13.96% and 19.93%...
There are two stocks in the market, Stock A and Stock B . The price of...
There are two stocks in the market, Stock A and Stock
B . The price of Stock A today is $85. The price
of Stock A next year will be $74 if the economy is in a
recession, $97 if the economy is normal, and $107 if the economy is
expanding. The probabilities of recession, normal times, and
expansion are .30, .50, and .20, respectively. Stock A
pays no dividends and has a correlation of .80 with the market
portfolio....
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