Question
In: Accounting
Consider the following probability distribution for stocks A and B: State Probability Return on Stock A...
Consider the following probability distribution for stocks A and
B:
| State | Probability | Return on Stock A | Return on Stock B | ||||||
| 1 | 0.10 | 10 | % | 8 | % | ||||
| 2 | 0.20 | 13 | % | 7 | % | ||||
| 3 | 0.20 | 12 | % | 6 | % | ||||
| 4 | 0.30 | 14 | % | 9 | % | ||||
| 5 | 0.20 | 15 | % | 8 | % | ||||
Let G be the global minimum variance portfolio. The weights of A and B in G are ________ and ________, respectively.
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Consider the following probability distribution for stocks A and B: State Probability Return on A Return...
Consider the following probability distribution for stocks A and
B:
State
Probability
Return on A
Return on B
1
.15
8%
8%
2
.2
13%
7%
3
.15
12%
6%
4
.3
14%
9%
5
.2
16%
11%
If you invest 35% of your portfolio in stock A, and the rest
(65%) in stock B, what would be your portfolio's standard
deviation? Please enter your answer in percent rounded to the
nearest basis point.
Consider the following probability distribution for stocks A and B. Scenario Probability Return on Stock A...
Consider the following probability distribution for stocks A and
B.
Scenario
Probability
Return on Stock A
Return on Stock B
1
.35
12%
-15%
2
.4
4%
5%
3
.25
-4%
25%
1. What are the expected returns and standard deviations for
stocks A and B?
2. What is the correlation coefficient between the two
stocks?
3. Suppose the risk-free rate is 2%. What is the optimal risky
portfolio, its expected return and its standard deviation?
4. Suppose that stocks...
Consider the following probability distribution for stocks C and D: State Probability Return on Stock C...
Consider the following probability distribution for stocks C and
D:
State
Probability
Return on Stock C
Return on Stock D
1
0.30
7
%
–
9
%
2
0.50
11
%
14
%
3
0.20
–
16
%
26
%
If you invest 25% of your money in C and 75% in D, what would be
your portfolio's expected rate of return and standard
deviation?
Select one:
a. 9.891%; 8.70%
b. 9.945%; 11.12%
c. 8.225%; 8.70%
d. 10.275%; 11.12%
Consider the following probability distributions for stocks A and B: State Probability Return on A Return...
Consider the following probability distributions for stocks A
and B:
State
Probability
Return on A
Return on B
1
.3
7%
-9%
2
.5
11%
14%
3
.2
-16%
26%
What is the standard deviation of returns for stock A? Please
give your answer in percent rounded to the nearest basis point.
What is the standard deviation of returns for stock B? Please
give your answer in percent rounded to the nearest basis point.
Consider the following probability distributions for stocks A and B: State Probability Return on A Return...
Consider the following probability distributions for stocks A
and B:
State
Probability
Return on A
Return on B
1
.3
7%
-9%
2
.5
11%
14%
3
.2
-16%
26%
a) What is the standard deviation of returns for stock A? Please
give your answer in percent rounded to the nearest basis point.
b) What is the standard deviation of returns for stock B? Please
give your answer in percent rounded to the nearest basis point.
Consider the following probability distributions for stocks A and B: State Probability Return on A Return...
Consider the following probability distributions for stocks A
and B:
State
Probability
Return on A
Return on B
1
.3
7%
-9%
2
.5
11%
14%
3
.2
-16%
26%
A. What is the correlation between stocks A and B? Please give
your answer in decimal form rounded to the third decimal place.
B. What is the standard deviation of returns for stock A? Please
give your answer in percent rounded to the nearest basis point.
C. What is the...
Consider the following probability distribution for Stock Fund (S) and Bond Fund (B). State Probability Return...
Consider the following probability
distribution for Stock Fund (S) and Bond Fund (B).
State
Probability
Return on Bond Fund
Return on Stock Fund
1
.2
-10%
20%
2
.4
10%
30%
3
.4
18%
-10%
The expected return and the standard deviation of the Stock Fund
are 12% and 18.33%, respectively.
What is the expected return of Bond Fund?
8.2%
8.5%
8.9%
9.2%
9.6%
What is the standard deviation of Bond Fund?
8.57%
9.23%
9.45%
10.25%
12.78%
What is the...
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 Stocks I and II: State of Probability of Rate of Return...
Consider the following information on Stocks I and II:
State of Probability of Rate of Return if State Occurs
Economy State of Economy Stock I Stock II
Recession .21 .015 ? .31
Normal .56 .325 .23
Irrational exuberance .23 .185 .41
The market risk premium is 11.1 percent, and the risk-free rate
is 4.1 percent.
Calculate the beta and standard deviation of Stock I. (Do not round
intermediate calculations. Enter the standard deviation as a
percent and round both answers...
Consider the following information on Stocks I and II: State of Probability of Rate of Return...
Consider the following information on Stocks I and II:
State of
Probability of
Rate of Return if State Occurs
Economy
State of Economy
Stock I
Stock II
Recession
.27
.030
?
.22
Normal
.62
.330
.14
Irrational exuberance
.11
.190
.42
The market risk premium is 11.2 percent, and the risk-free rate
is 4.2 percent.
Calculate the beta and standard deviation of Stock I. (Do
not round intermediate calculations. Enter the standard deviation
as a percent and round both answers...
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