Question
In: Finance
If you have 3 stocks (A), (B), & (C). The following are the rates of returns...
If you have 3 stocks (A), (B), & (C). The following are the rates of returns in the last 5 years for the three stocks:
|
Stock A |
Stock B |
Stock C |
|
30 |
60 |
20 |
|
20 |
35 |
30 |
|
40 |
20 |
40 |
|
25 |
25 |
35 |
|
35 |
20 |
40 |
Required
- Calculate the expected returns for individual stocks A, B & C.
- Calculate the expected risk for individual stocks A, B & C.
- Calculate the covariance and correlation between A&B stocks and A&C stocks
- If you decide to construct a portfolio that consist of 40 % for stock (A) & 60% for the selected stocks (B or C). Which portfolio would you choose? Why?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
If you have 3 stocks (A), (B), & (C). The following are the rates of returns...
If you have 3 stocks (A), (B), & (C). The following are the
rates of returns in the last 5 years for the three stocks:
Stock A
Stock B
Stock C
30
60
20
20
35
30
40
20
40
25
25
35
35
20
40
Required
Calculate the expected returns for individual stocks A, B &
C.
Calculate the expected risk for individual stocks A, B &
C.
Calculate the covariance and correlation between A&B stocks
and A&C stocks...
Consider the following information for three stocks, Stocks A, B, and C. The returns on the...
Consider the following information for three stocks, Stocks A,
B, and C. The returns on the three stocks are positively
correlated, but they are not perfectly correlated. (That is, each
of the correlation coefficients is between 0 and 1.)
Stock
Expected Return
Standard Deviation
Beta
A
7.94
16
0.7
B
9.62
16
1.1
C
11.72
16
1.6
Fund P has one-third of its funds invested in each of the three
stocks. The risk-free rate is 5%, and the market is...
Consider the following information for Stocks A, B, and C. The returns on the three stocks...
Consider the following information for Stocks A, B, and C. The
returns on the three stocks are positively correlated, but they are
not perfectly correlated. (that is, each of the correlation
coefficients is between 0 and 1).
Stock Expected Return Standard Deviation Beta
A 9.55% 15.00% 0.9
B 10.45% 15.00% 1.1
C 12.70% 15.00% 1.6
Fund P has one-third of its funds invested in each of the
three stocks. The risk-free rate is 5.5%, and the market is in
equilibrium....
Consider the following information for stocks A, B, and C. The returns on the three stocks...
Consider the following information for stocks A, B, and C. The
returns on the three stocks are positively correlated, but they are
not perfectly correlated. (That is, each of the correlation
coefficients is between 0 and 1.)
Stock
Expected Return
Standard Deviation
Beta
A
9.35%
15%
0.7
B
12.65
15
1.3
C
14.85
15
1.7
Fund P has one-third of its funds invested in each of the three
stocks. The risk-free rate is 5.5%, and the market is in
equilibrium....
Consider the following information for stocks A, B, and C. The returns on the three stocks...
Consider the following information for stocks A, B, and C. The
returns on the three stocks are positively correlated, but they are
not perfectly correlated. (That is, each of the correlation
coefficients is between 0 and 1.)
Stock
Expected Return
Standard Deviation
Beta
A
8.65%
16%
0.7
B
10.45
16
1.1
C
12.25
16
1.5
Fund P has one-third of its funds invested in each of the three
stocks. The risk-free rate is 5.5%, and the market is in
equilibrium....
Consider the following information for stocks A, B, and C. The returns on the three stocks...
Consider the following information for stocks A, B, and C. The
returns on the three stocks are positively correlated, but they are
not perfectly correlated. (That is, each of the correlation
coefficients is between 0 and 1.)
Stock
Expected Return
Standard Deviation
Beta
A
8.75%
14%
0.9
B
9.75
14
1.3
C
10.75
14
1.7
Fund P has one-third of its funds invested in each of the three
stocks. The risk-free rate is 6.5%, and the market is in
equilibrium....
Consider the following information for three stocks, Stocks A, B, and C. The returns on the...
Consider the following information for three stocks, Stocks A,
B, and C. The returns on the three stocks are positively
correlated, but they are not perfectly correlated. (That is, each
of the correlation coefficients is between 0 and 1.)
Stock
Expected Return
Standard Deviation
Beta
A
9.34
%
14
%
0.8
B
11.26
14
1.2
C
13.18
14
1.6
Fund P has one-third of its funds invested in each of the three
stocks. The risk-free rate is 5.5%, and the...
Consider the following information for stocks A, B, and C. The returns on the three stocks...
Consider the following
information for stocks A, B, and C. The returns on the three stocks
are positively correlated, but they are not perfectly correlated.
(That is, each of the correlation coefficients is between 0 and
1.)
Stock
Expected
Return
Standard
Deviation
Beta
A
9.69%
14%
0.9
B
10.92
14
1.2
C
12.56
14
1.6
Fund P has one-third
of its funds invested in each of the three stocks. The risk-free
rate is 6%, and the market is in equilibrium....
Consider the following information for three stocks, Stocks A, B, and C. The returns on the...
Consider the following information for three stocks, Stocks A,
B, and C. The returns on the three stocks are positively
correlated, but they are not perfectly correlated. (That is, each
of the correlation coefficients is between 0 and 1.)
Stock Expected Return Standard Deviation Beta
A 8.01 % 15 % 0.7
B 10.16 15 1.2
C 11.88 15 1.6
Fund P has one-third of its funds invested in each of the three
stocks. The risk-free rate is 5%, and the...
Consider the following information for three stocks, Stocks A, B, and C. The returns on the...
Consider the following information for three stocks, Stocks A,
B, and C. The returns on the three stocks are positively
correlated, but they are not perfectly correlated. (That is, each
of the correlation coefficients is between 0 and 1.)
Stock
Expected Return
Standard Deviation
Beta
A
8.01
%
15
%
0.7
B
10.16
15
1.2
C
11.88
15
1.6
Fund P has one-third of its funds invested in each of the three
stocks. The risk-free rate is 5%, and the...
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