Question

In: Finance

You have a portfolio with a standard deviation of 25% and an expected return of 17%....

You have a portfolio with a standard deviation of

25%

and an expected return of

17%.

You are considering adding one of the two stocks in the following table. If after adding the stock you will have

30%

of your money in the new stock and

70%

of your money in your existing portfolio, which one should you add?

Expected

Return

Standard

Deviation

Correlation with

Your Portfolio's Returns

Stock A

14%

25%

0.2

Stock B

14%

18%

0.6

Standard deviation of the portfolio with stock A is

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago

You have a portfolio with a standard deviation of 25 % and an expected return of...

You have a portfolio with a standard deviation of 25 % and an expected return of 15 %. You are considering adding one of the two stocks in the following table. If after adding the stock you will have 20 % of your money in the new stock and 80 % of your money in your existing portfolio, which one should you add? Expected Return Standard Deviation Correlation with Your Portfolio's Returns Stock A 15% 23% 0.4 Stock B 15%...

Assume you manage a risky portfolio with an expected return of 17% and a standard deviation...

Assume you manage a risky portfolio with an expected return of 17% and a standard deviation of 27%. The T-bill rate is 7%. Your client chooses to invest a proportion (y) of his portfolio in your fund and the rest (1-y) in the T-bill money market fund. His overall portfolio will have an expected rate of return of 15% What is the proportion y? What is the standard deviation of the rate of return on your client’s portfolio?

You have a portfolio with a standard deviation of 22 % and an expected return of...

You have a portfolio with a standard deviation of 22 % and an expected return of 16 %. You are considering adding one of the two shares in the table below. If after adding the shares you will have 20 % of your money in the new shares and 80 % of your money in your existing portfolio, which one should you add? Expected return Standard deviation Correlation with your portfolio's returns Share A 13% 26% 0.4 Share B 13%...

You have a portfolio with a standard deviation of 30 % and an expected return of...

You have a portfolio with a standard deviation of 30 % and an expected return of 18 %. You are considering adding one of the two stocks in the following table. If after adding the stock you will have 30 % of your money in the new stock and 70 % of your money in your existing portfolio, which one should you add? Expected Return Standard Deviation Correlation with Your Portfolio's Returns Stock A 15% 23% 0.3 Stock B 15%...

You have a portfolio with a standard deviation of 21% and an expected return of 16%....

You have a portfolio with a standard deviation of 21% and an expected return of 16%. You are considering adding one of the two stocks in the following table. If after adding the stock you will have 20% of your money in the new stock and 80% of your money in your existing portfolio, which one should you add? Expected Return Standard Deviation Correlation with Your Portfolio's Returns Stock A 12% 25% 0.2 Stock B 12% 17% 0.5 What is...

You have a portfolio with a standard deviation of 26% and an expected return of 19%....

You have a portfolio with a standard deviation of 26% and an expected return of 19%. You are considering adding one of the two shares in the table below. If after adding the shares you will have 20% of your money in the new shares and 80% of your money in your existing portfolio, which one should you add? Expected return Standard deviation Correlation with your portfolio's returns Share A 13% 25% 0.4 Share B 13% 17% 0.5 Standard deviation...

You have a portfolio with a standard deviation of 30 %30% and an expected return of...

You have a portfolio with a standard deviation of 30 %30% and an expected return of 17 %17%. You are considering adding one of the two stocks in the following table. If after adding the stock you will have 20 %20% of your money in the new stock and 80 %80% of your money in your existing portfolio, which one should you add? Expected Return Standard Deviation Correlation with Your Portfolio's Returns Stock A 1616 % 2121 % 0.20.2 Stock...

Calculate the expected return and standard deviation of the portfolio.

A portfolio consists of two stocks: Stock Expected Return Standard Deviation Weight Stock 1 10% 15% 0.30 Stock 2 13% 20% ??? The correlation between the two stocks’ return is 0.50 Calculate the expected return and standard deviation of the portfolio. Expected Return: Standard Deviation: (i) Briefly explain, in general, when there would be “benefits of diversification” (for any portfolio of two securities). (ii) Describe whether the above portfolio would...

2. You have formed a portfolio of two securities. The portfolio weights, expected return, standard deviation...

2. You have formed a portfolio of two securities. The portfolio weights, expected return, standard deviation (SD) of the individual securities and the correlation between security 1 and 2 are as follows: Security 1: weight = 1.4 , expected return = 15% , standard deviation = 25%, Security 2: weight = -0.4, expected return = 5% , standard deviation = 5% Correlation (1,2) = 0.85 Also, there is a market portfolio and the market portfolio's expected return is E(R)=10% and...

You manage a risky portfolio with an expected rate of return of 17% and a standard...

You manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 35%. The T-bill rate is 5%. What is the Sharpe ratio of the risky portfolio? Your client chooses to invest 70% of a portfolio in your fund and 30% in an essentially risk-free money market fund. What is the expected return and standard deviation of the rate of return on their portfolio? Another client wishes to invest such that the resulting combination...