Question
In: Finance
Suppose Johnson & Johnson and Walgreen Boots Alliance have expected returns and volatilities shown here, see...
Suppose Johnson & Johnson and Walgreen Boots Alliance have expected returns and volatilities shown here, see the table below ,with a correlation of 22%.
Calculate (a) the expected return and
(b)the volatility (standard deviation) of a portfolio that consists of a long position of $8,000 in Johnson & Johnson and a short position of $2,000
in Walgreens.
a. Calculate the expected return.
The expected return is............%.(Round to one decimalplace.)
b. Calculate the volatility (standard deviation).
The volatility is..............%. (Round to one decimalplace.)
|
Expected Return |
Standard Deviation |
|||
|
Johnson & Johnson |
6.9% |
17.6% |
||
|
Walgreens Boots Alliance |
10.7% |
19.6% |
||
Solutions
Expert Solution
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -
jeff jeffy answered 1 year agoRelated Solutions
Suppose Johnson & Johnson and Walgreen Boots Alliance have expected returns and volatilities shown here the...
Suppose Johnson & Johnson and Walgreen Boots Alliance have
expected returns and volatilities shown here the table below
,with a correlation of 20%.Calculate the expected return and the
volatility (standard deviation) of a portfolio consisting of
Johnson & Johnson's and Walgreens' stocks using a wide range
of portfolio weights. Plot the expected portfolio return as a
function of the portfolio volatility. Using your graph, identify
the range of Johnson & Johnson's portfolio weights that yield
efficient combinations of the two...
Suppose Johnson & Johnson and Walgreen Boots Alliance have expected returns and volatilities shown here, check...
Suppose Johnson & Johnson and Walgreen Boots Alliance have
expected returns and volatilities shown here, check the table
below, with a correlation of 15%.
Calculate the expected return and the volatility (standard
deviation) of a portfolio consisting of Johnson & Johnson's
and Walgreens' stocks using a wide range of portfolio weights.
Plot the expected portfolio return as a function of the portfolio
volatility. Using your graph, identify the range of Johnson &
Johnson's portfolio weights that yield efficient combinations of...
Suppose Johnson & Johnson and the Walgreen Company have the expected returns and volatilities shown below,...
Suppose Johnson & Johnson and the Walgreen Company have the
expected returns and volatilities shown below, with a correlation
of 21.8%.
Upper E left bracket Upper R right bracketE
[R]
SD left bracket Upper R right bracketSD
[R]
Johnson & Johnson
7.2%
15.6%
Walgreen Company
10.3%
19.4%
For a portfolio that is equally invested in Johnson &
Johnson's and Walgreen's stock, calculate:
a. The expected return.
b. The volatility (standard deviation).
Porter Five (5) Forces Analysis of Walgreen Boots Alliance, Inc
Porter Five (5) Forces Analysis of Walgreen Boots Alliance,
Inc
Discuss Porter Five (5) Forces Analysis of Walgreen Boots Alliance, Inc 1. Competitive Rivalry 2. Supplier...
Discuss Porter Five (5) Forces Analysis of Walgreen Boots
Alliance, Inc 1. Competitive Rivalry 2. Supplier Power 3. Buyer
Power 4. Threat of Substitution 5. Threat of New Entry
Consider the following expected returns, volatilities, and correlations: Stock Expected Return Standard Deviation Correlation with duke...
Consider the following expected returns, volatilities, and
correlations:
Stock
Expected Return
Standard Deviation
Correlation with duke energy
Correlation With Microsoft
Correlation With Walmart
Duke Energy
15%
5%
1
-1
0
Microsoft
44%
24%
-1
1
0.7
Walmart
23%
14%
0
0.7
1
a. Consider a portfolio consisting of only Duke Energy and
Microsoft. What is the percentage of your investment (portfolio
weight) that you would place in Duke Energy stock to achieve a
risk-free investment? b. What is the expected...
Use the table for the question(s) below . Consider the following expected returns, volatilities, and correlations:...
Use the table for the question(s) below . Consider the following
expected returns, volatilities, and correlations: Stock Expected
Return Standard Deviation Correlation with Duke Energy Correlation
with Microsoft Correlation with Wal Mart − Duke Energy 14% 6% 1.0
1.0 − 0.0 Microsoft 44% 24% 1.0 − 1.0 0.7 Wal Mart − 23% 14% 0.0
0.7 1.0 Which of the following combinations of two stocks would
give you the biggest reduction in risk? A. Microsoft and Duke
Energy B. Duke Energy...
Stocks A and B have the expected returns and standard deviations shown in the table below:...
Stocks A and B have the expected returns and standard deviations
shown in the table below: Asset E(R) Std. deviation A 15% 30% B 20%
50% The correlation between A and B is 0.6. The risk-free rate is
3% and you have a risk-aversion parameter of 2. What is the
proportion of your investment in A and B, respectively, in your
optimal risky portoflio? A. 25.0% in A ; 75.0% in B B. 76.6% in A;
23,4% in B C....
Here are the expected returns and risks of two portfolios – a domestic and a foreign:...
Here are the expected returns and risks of two portfolios – a
domestic and a foreign:
E(r domestic) = 12% σdomestic = 10%
E(r foreign) = 16% σforeign =
12%
a. Assume a correlation of 0.5 and draw all the portfolios made
up of the two assets in
an Expected Return/Risk graph.
b. Repeat the procedure in part (a) assuming a correlation of
-1, 0, and +1.
c. Looking at the four graphs, what do you conclude about the
importance...
Here are the expected returns and risks of two portfolios – a domestic and a foreign:...
Here are the expected returns and risks of two portfolios – a
domestic and a foreign:
E(r domestic) = 12% σdomestic = 10%
E(r foreign) = 16% σforeign =
12%
a. Assume a correlation of 0.5 and draw all the portfolios made
up of the two assets in
an Expected Return/Risk graph.
b. Repeat the procedure in part (a) assuming a correlation of
-1, 0, and +1.
c. Looking at the four graphs, what do you conclude about the
importance...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- A house can be purchased for $155 comma 000155,000, and you have $25 comma 00025,000 cash...
- Instructions: SLLQueue (13 pts) ● Using the three properties below, implement the queue interface using the...
- The Typhoon Company uses straight-line depreciation. It lowers an estimated salvage value, resulting in a depreciation...
- The Wrigley Corporation needs to raise $17 million. The investment banking firm of Tinkers, Evers &...
- Millco, Inc., acquired a machine that cost $544,000 early in 2016. The machine is expected to...
- Given what you know about benefits plans and options, as well as costs and factors for...
- Basic psychological processes play an important role in understanding how consumers make decisions. Marketers must therefore...
ADVERTISEMENT