Question
In: Finance
Jamie Wong is considering building an investment portfolio containing two stocks, L and M. Stock L...
Jamie Wong is considering building an investment portfolio containing two stocks, L and M. Stock L will represent 20 % of the dollar value of the portfolio, and stock M will account for the other 80 %. The expected returns over the next 6 years, 2015minus 2020, for each of these stocks are shown in the following table:
Expected return
Year Stock L Stock M
2015 14 % 25 %
2016 15 % 24 %
2017 16 % 23 %
2018 17 % 22 %
2019 17 % 21 %
2020 18 % 20 %
. a. Calculate the expected portfolio return, rp , for each of the 6 years. b. Calculate the expected value of portfolio returns, r p , over the 6-year period. c. Calculate the standard deviation of expected portfolio returns, sigma Subscript rp, over the 6-year period. d. How would you characterize the correlation of returns of the two stocks L and M? e. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio.
Solutions
Expert Solution
SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
jeff jeffy answered 1 year agoRelated Solutions
Assume you are considering a portfolio containing two assets, L and M. Asset L will represent...
Assume you are considering a portfolio containing two assets, L
and M. Asset L will represent 40 % of the dollar value of the
portfolio, and asset M will account for the other 60 % . The
projected returns over the next 6 years, 2018 dash2023 , for each
of these assets are summarized in the following table: LOADING...
. a. Calculate the projected portfolio return, r overbar Subscript
p , for each of the 6 years. b. Calculate the...
Assume you are considering a portfolio containing two assets, L and M. Asset L will represent...
Assume you are considering a portfolio containing two assets, L
and M. Asset L will represent 39% of the dollar value of the
portfolio, and asset M will account for the other 61%. The
projected returns over the next 6 years, 2018-2023, for each of
these assets are summarized in the following table:
Projected Return
Year Asset L Asset M
2018 13% 21%
2019 13% 17%
2020 15% 17%
2021 17% 14%
2022 17% 12%
2023 18% 11%
a....
Assume you are considering a portfolio containing two assets, L and M. Asset L will represent...
Assume you are considering a portfolio containing two assets, L
and M. Asset L will represent 56 % of the dollar value of the
portfolio, and asset M will account for the other 44 %. Assume that
the portfolio is rebalanced at the end of each year. The expected
returns over the next 6 years, 2018dash2023, for each of these
assets are summarized in the following table:
Projected Return
Year
Asset L
Asset M
2018
14%
21%
2019
14%
17%...
Assume you are considering a portfolio containing two assets, L and M. Asset L will represent...
Assume you are considering a portfolio containing two assets, L
and M. Asset L will represent 44 % of the dollar value of the
portfolio, and asset M will account for the other 56 %. The
projected returns over the next 6 years, 2018-2023, for each of
these assets are summarized in the following table: a. Calculate
the projected portfolio return, r p, for each of the 6 years. b.
Calculate the average expected portfolio return, r overbar
Subscript p,...
You are considering building up an investment portfolio of stocks (S) and/or short term Treasury bills...
You are considering building up an investment portfolio of
stocks (S) and/or short term Treasury bills (T). The returns from
both sources are judged uncertain, of course, as the following
probability table indicates:
T
S
-10%
0%
10%
20%
6%
0
0
0.10
0.10
8%
0
0.10
0.30
0.20
10%
0.10
0.10
0
0
(1) If you split your investment 70% in stock and 30% in
Treasury bills, what are the expected rate of return and standard
deviation of the...
1. You are considering building up an investment portfolio of stocks (S) and/or short term Treasury...
1. You are considering building up an investment portfolio of
stocks (S) and/or short term Treasury bills (T). The returns from
both sources are judged uncertain, of course, as the following
probability table indicates:
T
S
-10%
0%
10%
20%
6%
0
0
0.20
0.20
8%
0
0.10
0.20
0.10
10%
0.10
0.10
0
0
Are the returns of stock and bond independent?
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%...
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 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...
Your investment club has only two stocks in its portfolio. $30,000 is invested in a stock...
Your investment club has only two stocks in its portfolio.
$30,000 is invested in a stock with a beta of 0.4, and $60,000 is
invested in a stock with a beta of 2.2. What is the portfolio's
beta? Round your answer to two decimal places.
AA Corporation’s stock has a beta of 1.3. The risk-free rate is
7% and the expected return on the market is 11%. What is the
required rate of return on AA's stock? Round your answer...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- An investment project costs $20,100 and has annual cash flows of $4,400 for six years. ...
- PUT IN JAVA PROGRAMMING The StockB class: Design a class named StockB that contains the following...
- Draw a DFA for the following ( ∑ = {0,1}): Set of all strings with.
- In the article from Forbes notes that the goal of a leader is not to clone...
- Many people keep time using a 24 hour clock (11 is 11am and 23 is 11pm,...
- UNIX ONLY -- DIFFICULT LAB ASSIGNMENT This is an extremely difficult subject for me. Could you...
- Do you know why your credit card can be refused even though you are profitable?
ADVERTISEMENT