Question

In: Statistics and Probability

Please answer both of the following Two stocks are being considered for a portfolio. We are...

Please answer both of the following

Two stocks are being considered for a portfolio. We are interested to see if there is a relationship between the two stocks. The covariance for stocks x & y is -1.84. The standard deviation of stock x is 1.25 and the standard deviation of stock y is 1.65. What is the correlation coefficient for the two stocks?

A. -1.47

B. -.6344

C. -.892

D.-.40

Given the following Discrete Distribution, what is the expected value (E(x))?

x f(x)

35 .20

55 .50

20 .30

A. 40.5

B. 55

C. 36.67

D. 28

Expert Solution

# First question

Cov(X,Y) = covariance between x and y = -1.84

Formula for correlation coefficient

Round correlation coefficient up to 3 decimal place

Correlation coefficient = - 0.892

Answer for First part

Correct choice is ( C) choice

Correlation coefficient = - 0.892

# second question

Formula for mean that is E(x)

P(x) means column of f(x)

x	p(x)	x * p(x)
35	0.20	= 35*0.20 = 7
55	0.50	= 550.50 = 27.5*
20	0.30	=20*0.30 = 6

E(X) means sum of the calculated value from third column

Final answer for second part :-

Correct choice is (A) for second part

orchestra answered 1 year ago

A person is interested in constructing a portfolio. Two stocks are being considered. Let x =...

A person is interested in constructing a portfolio. Two stocks are being considered. Let x = percent return for an investment in stock 1, and y = percent return for an investment in stock 2. The expected return and variance for stock 1 are E(x) = 8.55% and Var(x) = 25. The expected return and variance for stock 2 are E(y) = 3.40% and Var(y) = 1. The covariance between the returns is σxy = −3. (a) What is the standard...

I have purchased the stocks listed below. My portfolio beta is 1.031. Please answer the following...

I have purchased the stocks listed below. My portfolio beta is 1.031. Please answer the following questions: STOCKS MARKET VALUE BETA WEIGHT BETA * WEIGHT TSLA $ 25,099.20 1.64 0.076092 0.124791056 TWTR $ 24,280.83 1.12 0.073611 0.082444423 GOOG $ 23,865.60 1.08 0.072352 0.078140439 SBUX $ 25,363.38 0.79 0.076893 0.060745478 DELL $ 24,890.25 1.36 0.075459 0.102623755 MCD $ 24,772.41 0.68 0.075101 0.051068947 WMT $ 27,137.70 0.29 0.082272 0.023858919 AAPL $ 25,159.68 1.28 0.076275 0.097632591 AMZN $ 26,356.96 1.32 0.079905 0.105474866 NKE...

(please fast!!) A portfolio is formed out of two stocks A and B and the correlation...

(please fast!!) A portfolio is formed out of two stocks A and B and the correlation coefficient between the two stocks is 1. Stock A has a standard deviation of 10%, whereas stock B has a standard deviation of 17%. This portfolio contains 50% of stock A and 50% of stock B. What is the standard deviation of this portfolio?

Suppose we had two stocks, A and B. Both are selling for $10 in the market....

Suppose we had two stocks, A and B. Both are selling for $10 in the market. Stock A has an expected rate of return of 2%, while stock B has an expected rate of return for 6%. (a)What is the expected income one would receive from holding Stock A? How about for Stock B? (b)Given that their market prices are equal, which stock do you think incurs a greater amount of risk? Why? Suppose the market changes, such that now...

Please answer both question as a discussion board The sales budget is considered the primary driver...

Please answer both question as a discussion board The sales budget is considered the primary driver of all other budgets including budget balance sheet and cash budget. 1. Explain why it is critical the sales budget is the first budget prepared in the master budget. 2. Describe how changes in the sales budget can ripple through the operating budgets and impact the cash budget and budgeted balance sheet.

Jack has a portfolio with two stocks ABC and XYZ with the following parameters:

Jack has a portfolio with two stocks ABC and XYZ with the following parameters: $ Invested Expected Return Standard Deviation of Return ABC $4000 4.45% 8.23% XYZ $6000 7.96% 9.76% The correlation coefficient between ABC and XYZ is 0.40. A. Compute expected return of the portfolio. B. Calculate covariance of ABC and XYZ stock. C. Compute the standard deviation of the portfolio.

You are given the following information about the stocks in a two-stock portfolio:

You are given the following information about the stocks in a two-stock portfolio: Stock Return Portfolio Weight Standard Deviation The Blue Hotel, Inc. 22% 45% 9% Joys Food, Inc. 25% 55% 11% Correlation coefficient between the two stocks is 0.5. Using the information above, calculate the following: The expected return of the portfolio, The variance of the portfolio, The standard deviation of the portfolio. （All calculations must be shown for intermediate calculations）

Suppose we observe two stocks with the following characteristics:

Suppose we observe two stocks with the following characteristics: StockExpected returnBetaK20%1.6L12%0.9a. An asset is said to be overvalued if its price is too high given its expected return and risk. The risk-free rate is currently 6%. Is one of the two stocks overvalued relative to the other? Explain your answer fully (i.e., provide reasons why you think the stock is or is not overvalued). ...

Two mutually exclusive alternative are being considered. Both have lives of 10 years. Alternative A has...

Two mutually exclusive alternative are being considered. Both have lives of 10 years. Alternative A has a fist cost of $10,000 and annual benefits of $4500. Alternative B costs $25,000 and has annual benefits of $8800. If the minimum attractive rate of return is 6%, which alternative should be selected? Solve the problem by a) Present worth analysis. b) Annual cash flow analysis. c) Rate of return analysis.

If we have a portfolio of multiple stocks with given expected returns and variances, do we...

If we have a portfolio of multiple stocks with given expected returns and variances, do we prefer to hold stocks with higher or lower correlations? Explain your answer for full credit.