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

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related 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....

Historical Realized Rates of Return Stocks A and B have the following historical returns: Year 2012...

Historical Realized Rates of Return Stocks A and B have the following historical returns: Year 2012 -19.60% -14.00% 2013 20.00 30.00 2014 12.00 35.30 2015 -1.00 -10.20 2016 31.50 1.80 Calculate the average rate of return for each stock during the 5-year period. Round your answers to two decimal places. Stock A % Stock B % Assume that someone held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate...

REALIZED RATES OF RETURN Stocks A and B have the following historical returns: Year Stock A's...

REALIZED RATES OF RETURN Stocks A and B have the following historical returns: Year Stock A's Returns, rA Stock B's Returns, rB 2011 - 15.90% - 16.50% 2012 33.50 21.20 2013 11.25 31.60 2014 - 6.00 - 8.80 2015 34.00 29.35 Calculate the average rate of return for stock A during the period 2011 through 2015. Round your answer to two decimal places. % Calculate the average rate of return for stock B during the period 2011 through 2015. Round...

Subjects