Question

In: Finance

Probability          Stock A                 Stock B           &n

Probability          Stock A                 Stock B                 Stock C

.30                          9%                          35%                        3%

.30                          15%                        28%                        9%

.40                          7%                          21%                        15%

6) Find the expected return of the portfolio with 50% invested in stock A and 50% invested in stock B. (Round your answer to 2 decimal places)


7) Find the expected return of the portfolio with 40% invested in stock A, 20% invested in stock B, and 40% invested in stock C. (Round your answer to 2 decimal Places)


8) Find the portfolio 1 Variance (answer 1) and standard Deviation (answer 2). (round to 2 decimal places)


9) Find the portfolio variance (answer 1) and standard deviation (answer 2) for portfolio 2. (round your answer to 2 decimal places.

Solutions

Expert Solution


Related Solutions

The price of Stock A today is 50, and stock B is 100. The probability of...
The price of Stock A today is 50, and stock B is 100. The probability of a booming, normal, and recessionary economy are 0.2, 0.7, and 0.1 respectively. If the economy is booming, stock’s A price will be 65 and stock B will be 108. If the economy is normal, stock’s A price will be 55 and stock’s B will be 105. If the econ falls into recession, stock’s A price will be 40 and stock’s B will be 102....
Question 1: Given the following probability distributions for stock A and stock B Probability R_A R_B...
Question 1: Given the following probability distributions for stock A and stock B Probability R_A R_B 0.3 0.3 0.05 0.2 0.1 0.15 0.5 -0.02 0.25 Calculate (a) expected return, (b) standard deviation (c) coefficient of variation for each stock (analyze single stock separately: do expected return for A, standard deviation for A, CV for A. Then repeat the steps for stock B)
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.
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 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% 1) Let G be the global minimum variance portfolio. The weights of A and B in G are __________ and __________, respectively.
Example: Find the CV of Stock A and B Economic Outcome Probability Return Stock A Stock...
Example: Find the CV of Stock A and B Economic Outcome Probability Return Stock A Stock B 1. Recession P1 = .20 R1 = .01 R1 = .02 2. Recovery P2 = .50 R2 = .10 R2 = .04 3. Growth P3 = .30 R3 = .12 R3 = .08 Expected Return (R) 8.8% 4.8% Standard Deviation (σ) 3.99% 2.23% Coefficient of Variation (CV)
Consider the following information: State of the economy Probability of the Economy Stock A Stock B...
Consider the following information: State of the economy Probability of the Economy Stock A Stock B St ock C Boom 0.25 0.35 0.45 0.25 Normal 0.50 0.20 0.25 0.15 POOR 0.25 -0.10 -0.15 -0.10 a. Calculate the Expected returns of the stocks individually. b. Now, you have the expected values of the stocks, assume that, Your portfolio is invested 30% each in stock A and stock B. What is the return of the portfolio?
The following represents the probability distribution of future returns for stock A and stock B. State...
The following represents the probability distribution of future returns for stock A and stock B. State of Economy Probability Return on Security A Return on Security B Boom 0.20 18% 4% Normal 0.60 8% 8% Recession 0.20 −4% 12% a. What is the expected return for Security A and Security B? b. What is the expected return on a portfolio consisting of 50% investment in Security A and 50% in security B? c. What is the standard deviation of a...
COMMON STOCK A COMMON STOCK B PROBABILITY RETURN PROBABILITY RETURN 0.25 10​% 0.20 −5​% 0.50 15​%...
COMMON STOCK A COMMON STOCK B PROBABILITY RETURN PROBABILITY RETURN 0.25 10​% 0.20 −5​% 0.50 15​% 0.30     6% 0.25 18​% 0.30 16% 0.20 22% expected rate of return and risk​) Summerville Inc. is considering an investment in one of two common stocks. Given the information in the popup​ window: ​, which investment is​ better, based on the risk​ (as measured by the standard​ deviation) and return of​ each? a. The expected rate of return for Stock A is ​%. ​(Round...
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...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT