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In: Finance
You have two stocks in your investment portfolio, Z and Y. Z consists 70% of your...
You have two stocks in your investment portfolio, Z and Y. Z consists 70% of your portfolio and Y 30% of your portfolio. βA is 0,5 and βB is 1,7. The mean return on the market is 8% and the risk-free rate of return is 2%. Assume that the CAPM model applies. Calculate the mean return of your portfolio.
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Your investment portfolio consists of the following stocks &n
Your investment portfolio consists of the following stocks
Investment Portfolio
Name
Price
Beta
# shares
Dow Chemical
$ 59.72
1.34
15,000
Walmart
$ 69.32
0.19
3,000
Boeing
$ 128.00
1.36
8,000
Verizon
$ 52.61
0.45
6,000
Consolidated Edison
$ 74.00
0.17
3,000
Caterpillar
$ 75.00
1.5
13,000
Deutsche bank
$ 22.55
1.4
9,000
a) What is the portfolio
beta?
b) What is the required
return on the portfolio if the market return is 11 % and the risk
free rate is...
Your client wants to construct a portfolio from two stocks (Stocks Y and Z) and has...
Your client wants to construct a portfolio from two stocks
(Stocks Y and Z) and has asked you to determine the portfolio
weights for each stock that will generate the portfolio with the
smallest standard deviation. Use the relevant information in the
table below to calculate the standard deviation for each portfolio
weighting scenario and indicate the scenario that you should
recommend to your client.
Stock Y
Stock Z
Portfolio Weighting Scenario
1
60%
40%
Portfolio Weighting Scenario
2
70%...
1a) In your portfolio you have invested 30% and 70% in Stock X and Stock Z,...
1a) In your portfolio you have invested 30% and 70% in Stock X
and Stock Z, respectively. The standard deviation of X is 12%. The
standard deviation of Z is 9%. The correlation between X and Z is
0.50. Calculate the portfolio standard deviation.
1b) For the same problem before, now calculate the portfolio
standard deviation if the correlation between X and Z is -0.50.
You invest your money in a portfolio that consists of 70% of Fund X and 30%...
You invest your money in a portfolio that consists of 70% of
Fund X and 30% of Fund B. The annual return for X is 10% and the
standard deviation is 15%. The annual return for Y is 9% and the
standard deviation is 19%. The correlation between X and Y is
0.60.
a. Compute the return and standard deviation of your portfolio
invested?
b. Assuming you hold this portfolio for over 20 years, what is
the probability of return...
(6 pts) You have an $80,000 portfolio of large-cap stocks. They consists of the following: Portfolio of...
(6 pts) You have an $80,000 portfolio of large-cap
stocks. They consists of the following:
Portfolio of large cap stocks:
Stock beta Dollar
amount
Wal-mart 0.70 $20,000
IBM 1.15 $10,000
PG 0.80 $50,000
Total $80,000
What is the beta of your
portfolio?
Portfolio Beta = _____________
If the current money market rate is 1.2% and the market risk
premium is 7.5%, what is the required rate of return for your large
cap stock portfolio?
Required Rate of Return =
_____________
(2 pts) An option contract represents an
option on ___________...
Assume that you have an investment portfolio of $200,000. The investment consists of $100,000 in Amazon...
Assume that you have an investment portfolio of $200,000. The
investment consists of $100,000 in Amazon and $100,000 in Apple.
You are thinking of rebalancing the portfolio by selling $30,000
worth of Alphabet and $30,000 worth of Apple. You plan to invest
the realized proceeds of $60,000 in Facebook stock. Assume that
betas of Amazon (1.63), Apple (0.99), and Facebook (1.18). A. What
would be the beta of your new portfolio? B. Say you decide to sell
off all the...
Assume that you have an investment portfolio of $200,000. The investment consists of $100,000 in Amazon...
Assume that you have an investment portfolio of $200,000. The
investment consists of $100,000 in Amazon and $100,000 in Apple.
You are thinking of rebalancing the portfolio by selling $30,000
worth of Alphabet and $30,000 worth of Apple. You plan to invest
the realized proceeds of $60,000 in Facebook stock. Assume that
betas of Amazon (1.63), Apple (0.99), and Facebook (1.18). A. What
would be the beta of your new portfolio? B. Say you decide to sell
off all the...
A portfolio consists of the following four stocks. The dollar investment and beta on each of...
A portfolio consists of the following four stocks. The dollar
investment and beta on each of the stocks are listed below:
Stock
Investment
Beta
A
$200,000
0.5
B
$800,000
0.8
C
$1,500,000
1.5
D
$2,500,000
-0.25
If the expected return on the market is 11% and the risk-free rate
is 4%, what is the portfolio’s required rate of return?
1. You have a $30,000 portfolio that consists of equal dollar investments in stocks A, B,...
1. You have a $30,000 portfolio that consists of equal dollar
investments in stocks A, B, and C, each with a current price of
$25. After one year, stock A is worth $40, stock B is worth $30,
and stock C is worth $12.50. You wish to rebalance the portfolio to
maintain equal dollar investments in each stock. How many shares of
each stock do you buy and/or sell to rebalance the portfolio? A
common behavioral hypothesis is that investors...
ou only have four stocks in your portfolio. What will happen to your portfolio if you...
ou only have four stocks in your portfolio. What will happen to
your portfolio if you add some randomly selected stocks to it?
Question 4 options:
a) The diversifiable risk will remain the same but the market
risk will rise.
b) The diversifiable risk to your portfolio will probably
decline while the expected market risk will not change.
c) The total portfolio risk should decline along with the
expected rate of return, but the market risk will remain
unchanged.
d)...
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