Question
In: Finance
Consider the following information. State of Economy Security A Security B Portfolio Return Boom 12% 10%...
-
Consider the following information.
|
State of Economy |
Security A |
Security B |
Portfolio Return |
|
Boom |
12% |
10% |
|
|
Normal |
7% |
9% |
|
|
Recession |
-4% |
-1% |
-
You allocate 40% in security A and 60% in security B to create a portfolio. What is the expected return of the portfolio? (10 points)
-
What is the standard deviation of the portfolio? (10 points)
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Consider the following information: State of the Economy Probability of State of the Economy Return on...
Consider the following information:
State of the Economy
Probability of State of the Economy
Return on A %
Return on B %
Boom
0.40
10
4
Growth
0.20
-4
0
Normal
0.20
24
16
Recession
0.20
16
20
a) What is the
expected return for A? For
B?
b) What is the
standard deviation for A? For
B?
c) What is the
expected return on a portfolio of A and B that is 30% invested in A
and the remainder...
Consider the following information: State of Economy Probability of State of Economy Rate of Return if...
Consider the following information:
State of
Economy
Probability of
State of Economy
Rate of Return
if State Occurs
Stock A
Stock B
Recession
.04
.097
.102
Normal
.72
.114
.133
Boom
.24
.156
.148
The market risk premium is 7.4 percent, and the risk-free rate is
3.1 percent. The beta of Stock A is ________ and the beta of Stock
B is ________.
a) 1.25; 1.41
b) 1.47; 1.76
c) 1.21; 1.76
d) 1.25; 1.89
e) 1.47; 1.41
Weight of Security A Weight of Security B Portfolio Return Portfolio Standard Deviation 0% 100% 12...
Weight of
Security A
Weight of
Security B
Portfolio
Return
Portfolio
Standard Deviation
0%
100%
12
225.0
20%
80%
10.4
121.0
40%
60%
8.8
49.0
60%
40%
7.2
9.0
80%
20%
5.6
1.0
100%
0%
4.0
25.0
How can you choose the right combination (i.e.,, the weights on
A and B) to create a risk-free portfolio?
Based on the result in part , could the equilibrium
rf be greater than 6%? Explain.
Use the following information to find expected return for this portfolio. State of Economy Probability of...
Use the following information to find expected
return for this portfolio.
State of Economy
Probability of State
Returns if State Occurs
Stock A
Stock B
Stock C
Stock D
Boom
40%
-15%
16%
25%
20%
Normal
30%
5%
10%
-3%
2%
Recession
30%
28%
6%
-10%
-5%
Portfolio Weights
10%
20%
30%
40%
ANSWERS:
11.20%
3.90%
8.19%
7.08%
7.30%
Use the following information to find expected return for this portfolio. State of Economy Probability of...
Use the following information to find expected
return for this portfolio.
State of Economy
Probability of State
Returns if State Occurs
Stock A
Stock B
Stock C
Stock D
Boom
40%
-15%
16%
25%
20%
Normal
30%
5%
10%
-3%
2%
Recession
30%
28%
6%
-10%
-5%
Portfolio Weights
10%
20%
30%
40%
ANSWERS:
11.20%
3.90%
8.19%
7.08%
7.30%
Consider the following information: Rate of Return if State Occurs State of Economy Probability of State...
Consider the following information: Rate of Return if State
Occurs State of Economy Probability of State of Economy Stock A
Stock B Recession 0.30 0.06 –0.20 Normal 0.30 0.11 0.11 Boom 0.40
0.15 0.28 a. Calculate the expected return for the two stocks. (Do
not round intermediate calculations. Enter your answers as a
percent rounded to 2 decimal places.) b. Calculate the standard
deviation for the two stocks. (Do not round your intermediate
calculations. Enter your answers as a percent...
Consider the following information: Rate of Return if State Occurs State of Economy Probability of State...
Consider the following information: Rate of Return if State
Occurs State of Economy Probability of State of Economy Stock A
Stock B Recession 0.10 0.05 -0.18 Normal 0.60 0.08 0.14 Boom 0.30
0.13 0.33 Required: (a) Calculate the expected return for Stock A.
(Do not round your intermediate calculations.) (b) Calculate the
expected return for Stock B. (Do not round your intermediate
calculations.) (c) Calculate the standard deviation for Stock A.
(Do not round your intermediate calculations.) (d) Calculate the...
Consider the following information: Rate of Return if State Occurs State of Economy Probability of State...
Consider the following information: Rate of Return if State
Occurs State of Economy Probability of State of Economy Stock A
Stock B Stock C Boom .30 .19 .43 .24 Good .20 .17 .17 .14 Poor .10
−.04 −.14 .03 Bust .40 −.16 −.22 −.11 a. Your portfolio is invested
25 percent each in Stocks A and C and 50 percent in Stock B. What
is the expected return of the portfolio?
Expected return:____________%
Consider the following information: Rate of Return if State Occurs State of Economy Probability of State...
Consider the following information: Rate of Return if State
Occurs State of Economy Probability of State of Economy Stock A
Stock B Recession 0.10 0.04 -0.18 Normal 0.70 0.08 0.12 Boom 0.20
0.12 0.33 Required: (a) Calculate the expected return for Stock A.
(Do not round your intermediate calculations.) (b) Calculate the
expected return for Stock B. (Do not round your intermediate
calculations.) (c) Calculate the standard deviation for Stock A.
(Do not round your intermediate calculations.) (d) Calculate the...
Consider the following information: Rate of Return if State Occurs State of Probability of State Economy...
Consider the
following information:
Rate of Return if State Occurs
State of
Probability of State
Economy
of
Economy
Stock A
Stock B
Stock C
Boom
.69
.12
.06
.37
Bust
.31
.26
.32
–.17
Required:
(a)
What is the expected return on an equally weighted portfolio of
these three stocks? (Do
not round intermediate calculations. Enter your answer as a
percentage rounded to 2 decimal places (e.g.,
32.16).)
Expected
return
%
(b)...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Assume you have the Pandas DataFrame data, with the following contents: our_columns_name column_A column_B column_C column_D...
- A researcher investigates the factors that are associated with the salaries of professors who teach courses...
- Briefly describe postpartum depression. What are some of the symptoms that distinguish it from a more...
- In the following Java program replace conditions in while loops to produce Christmas tree output. import...
- Please Show work 1) A certain medical machine emits x-rays with a minimum wavelength of 0.025...
- An analyst has estimated that there will be an 84% learning curve for an assembly operation....
- Comprehensive Variance Problem The standard cost sheet for Chambers Company, which manufactures one product, follows: Direct...
ADVERTISEMENT