Question

In: Finance

the following table provides stock return distributions in the coming year for three companies, A, B...

the following table provides stock return distributions in the coming year for three companies, A, B and C.
State of Economy: Normal, Recession
Probability of State of Economy: Normal=0.65, Recession = 0.35
Stock A Rate of Return: Normal = 14.3%
Recession = -9.8%
Stock B Rate of Return: Normal = 16.7%
Recession = 5.4%
Stock C rate of return: Normal = 18.2%
Recession = -26.9%

a) consider a portfolio that is invested 40 percent in stock A, 30 percent in stock b, and the remainder in stock c. what is the expected return on the portfolio?

b) what is the standard deviation on the portfolio returns above?

please show your work

Solutions

Expert Solution

1. 6.8940%

2. 12.668313%

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

You are given the returns for the following three stocks: Return Year Stock A Stock B...
You are given the returns for the following three stocks: Return Year Stock A Stock B Stock C 1 8% 7% -22% 2 8% 15% 35% 3 8% 3% 15% 4 8% 12% 3% 5 8% 3% 9% Calculate the arithmetic return, geometric return, and standard deviation for each stock. Do you notice anything about the relationship between an asset’s arithmetic return, standard deviation, and geometric return? Do you think this relationship will always hold?
Two stocks have the following return distributions. Probability Stock K return % Stock Y return %...
Two stocks have the following return distributions. Probability Stock K return % Stock Y return % 0.1 -10 30 0.2 5 20 0.4 20 20 0.2 25 10 0.1 30 -15 Do the necessary analysis and determine which stock is a better choice for a risk-averse investor.
The market and Stock A have the following probability distributions: Probability Return on Market Return on...
The market and Stock A have the following probability distributions: Probability Return on Market Return on Stock A 0.15 15% 18% 0.3 12% 15% 0.55 10% 11% a. Calculate the expected rates of return for the market and Stock A. b. Calculate the standard deviations for the market and Stock A. c. Calculate the coefficient of variation for the market and Stock A.
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...
(a) The following table provides information about two NZX listed companies, A Ltd and B Ltd,...
(a) The following table provides information about two NZX listed companies, A Ltd and B Ltd, with some missing entries: A Ltd B Ltd Actual return in share price for the current year 0.095 0.065 Expected return in share price for the current year ? ? Abnormal return in share price for the current year 0.00645 ? Market model equation E(R) = 0.033 + 1.010 × Rm ? Two analysts provide the following  market model equations for B Ltd, respectively: Analyst...
Question 2: The following table provides earnings information about two companies, A Ltd and B Ltd:...
Question 2: The following table provides earnings information about two companies, A Ltd and B Ltd: A Ltd B Ltd Current year’s total earnings $595 mil $148 mil Current year’s total shares outstanding 100 mil 50 mil Prior year’s earnings per share $6.50 $3.93 You are also given two different abnormal returns in share price for the current year, -0.026 (i.e., - 2.6%) and -0.017 (i.e., -1.7%), which are calculated from market model equations for A Ltd and B Ltd....
Assume the following statistics for Stock A and Stock B: Stock A Stock B Expected return...
Assume the following statistics for Stock A and Stock B: Stock A Stock B Expected return .015 .020 Variance .050 .060 Standard deviation .224 .245 Weight 40% 60% Correlation coefficient .50 1) What is the expected return of the portfolio that consists of stocks A and B 2) Calculate the variance of this two-security portfolio? 3) Recalculate the expected return and the variance for the portfolio of the two securities when: - the correlation is = +1. - the correlation...
You are given the returns for the following three stocks: Year Stock A Stock B Stock...
You are given the returns for the following three stocks: Year Stock A Stock B Stock C 1 9 % 9 % -24 % 2 9 14 37 3 9 6 16 4 9 4 9 5 9 12 7 Calculate the arithmetic return, geometric return, and standard deviation for each stock. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT