Question

In: Finance

Why is it useful to calculate the standard deviation of expected returns on a security? What...

Why is it useful to calculate the standard deviation of expected returns on a security? What is the main practical reality that limits the usefulness of this calculation?

Solutions

Expert Solution

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

Why is it useful to calculate the standard deviation of expected returns on a security? What...
Why is it useful to calculate the standard deviation of expected returns on a security? What is the main practical reality that limits the usefulness of this calculation?
Based on the following data; (a) calculate the expected return and the standard deviation of returns...
Based on the following data; (a) calculate the expected return and the standard deviation of returns for each stock. State of the Economy         Probability      Stock A Rate of Return   Stock B Rate of Return Recession                                  0.25                                 6%                                 -20% Normal Growth 0.45                                7%                                  13% Boom                                         0.3                                 11%                                   33%       (b) Calculate the expected return and the standard deviation on the portfolio, where the portfolio is formed by investing 65% of the funds in Stock A and the rest in Stock B
1. What is the expected standard deviation of the returns of a portfolio that is invested...
1. What is the expected standard deviation of the returns of a portfolio that is invested 25 percent in Stock A, 40 percent in Stock B, and the remainder invested in Stock C? (Hint: create a column showing the distribution of returns for the portfolio. Then, find the portfolio's expected return and variance as normally done for a single asset.) State of Economy Probability Return of A Return of B Return of C Boom 0.20 29% 15% 6% Normal 0.50...
You are given the following information on two securities. Security Expected Return Standard Deviation of Returns...
You are given the following information on two securities. Security Expected Return Standard Deviation of Returns A 10.0% 14.0% B 16.0% 12.0% The correlation between the returns on the two securities is +0.6. The standard deviation of returns of a portfolio earning an expected return of 14.0 percent is closest to: Group of answer choices A 11.4%. B 9.3%. C 27.1%. D 12.7%.
What is the standard deviation of returns of an equally weighted portfolio made up of Security A and Security B?
Security Return(S1)   Return(S2)                       A                16%                 20%                                                B                12%                 25%                                           Risk-free asset return = 4%;                        S1 is State-1 and S2 is State-2;                                 Prob(S1) = 0.6; Prob(S2) = 0.4What is the standard deviation of returns of an equally weighted portfolio made up of Security A and Security B?
What is the standard deviation of the returns?
  You are analyzing the returns of a mutual fund portfolio for the past 5 years. Year Return 2014 -30% 2015 -25% 2016 40% 2017 -10% 2018 15% What is the standard deviation of the returns?  
Is it possible that a security with a positive standard deviation of returns could have a...
Is it possible that a security with a positive standard deviation of returns could have a beta of zero (excluding T-bills)? Explain. From the CAPM, what is the expected return on such an asset? Is it possible that a security with a positive standard deviation could have an expected return from the CAPM that is less than the risk-free rate? If so, what would its beta be? Would anyone be willing to purchase such a stock? Discuss.
Q1: Calculate the standard deviation of returns on a stock that had the following returns in...
Q1: Calculate the standard deviation of returns on a stock that had the following returns in the past three years: Year Return    1 9%                                                         2 -12%                                                         3 18% Q: A company has a target capital structure of 55% common stock, 10% preferred       stock, and 35% debt. Its cost of equity is 13%, the cost of preferred stock is 7%,         and the cost of debt is 8%. The relevant tax rate is 30%. What is the company’s       Weighted Average Cost...
Describe what happens to the expected value and standard deviation of the portfolio returns when the...
Describe what happens to the expected value and standard deviation of the portfolio returns when the coeffi cient of correlation decreases.
What is the expected standard deviation of stock A’s returns based on the information presented in...
What is the expected standard deviation of stock A’s returns based on the information presented in the table? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098. Note that figures in the table are presented in decimal format, not as percentages. Outcome Probability of outcome Stock A return in outcome Good 0.2 0.8 Medium 0.5 0.1 Bad ? -0.5
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT