Question
In: Finance
Estimated Rate of Return on Alternative Investments State of Probability High U.S. Market 2-Stocks Economy of...
| Estimated Rate of Return on Alternative Investments | |||||||
| State of | Probability | High | U.S. | Market | 2-Stocks | ||
| Economy | of State | T-Bills | Tech | Collections | Rubber | Portfolio | HT&Coll |
| Recession | 0.1 | 8.0% | -22.0% | 28.0% | 10.0% | -13.0% | |
| Below Average | 0.2 | 8.0% | -2.0% | 14.7% | -10.0% | 1.0% | |
| Average | 0.4 | 8.0% | 20.0% | 0.0% | 7.0% | 15.0% | |
| Above Average | 0.2 | 8.0% | 35.0% | -10.0% | 45.0% | 29.0% | |
| Boom | 0.1 | 8.0% | 50.0% | -20.0% | 30.0% | 43.0% | |
| E(R) | 8.0% | 1.7% | 13.8% | 15.0% | |||
|
Standard Deviation |
0.0% | 13.4% | 18.8% |
15.3% |
|||
|
III. Calculate the E(R) of a portfolio consisting of 50% in High Tech and 50% in Collections.
|
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Solutions
Expert Solution
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -
jeff jeffy answered 2 years agoRelated Solutions
Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A...
Rate of Return if State Occurs State of Economy Probability of
State of Economy Stock A Stock B Recession .25 .03 −.15 Normal .55
.13 .13 Boom .20 .16 .33 a. Calculate the expected return for the
two stocks. (Do not round intermediate calculations. Enter your
answers as a percent rounded to 2 decimal places.) b. Calculate the
standard deviation for the two stocks. (Do not round your
intermediate calculations. Enter your answers as a percent rounded
to 2 decimal...
Rate of return if state occurs State of economy Probability of state of economy Stock A...
Rate of return if state occurs
State of economy
Probability of state of economy
Stock A
Stock B
Stock C
Boom
0.3
0.35
0.45
0.38
Good
0.3
0.15
0.20
0.12
Poor
0.3
0.05
–0.10
–0.05
Bust
0.1
0.00
–0.30
–0.10
5. Consider the
following information on three stocks in four possible future
states of the economy:
Your portfolio is invested 30% in A, 50% in B, and 20% in C.
What is the expected return of your portfolio?
What...
Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A...
Rate of Return if State Occurs
State of Economy
Probability of
State of Economy
Stock A
Stock B
Stock C
Boom
0.70
0.25
0.19
0.09
Bust
0.30
0.09
0.09
0.03
a. What is the expected return on an equally
weighted portfolio of these three stocks?
b. What is the variance of a portfolio invested
30 percent each in A and B and 40 percent in C?
Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A...
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.15
.39
.49
.29
Good
.55
.15
.20
.08
Poor
.25
−.01
−.09
−.07
Bust
.05
−.20
−.24
−.10
a.
Your portfolio is invested 24 percent each in A and C, and 52
percent in B. What is the expected return of the portfolio?
(Do not round intermediate calculations and enter your
answer as a percent rounded to...
Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A...
Rate of Return if State Occurs
State of Economy
Probability of State of Economy
Stock A
Stock B
Stock C
Boom
.25
.19
.35
.28
Good
.30
.14
.13
.14
Poor
.10
.00
−.10
−.05
Bust
.35
−.20
−.28
−.13
a. Your portfolio is invested 35 percent each
in Stocks A and C and 30 percent in Stock B. What is the expected
return of the portfolio? (Do not round intermediate
calculations. Enter your answer as a percent rounded to...
Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A...
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.25
.21
.33
.55
Normal
.60
.17
.11
.09
Bust
.15
.00
−
.21
−
.45
a-1.
If your portfolio is invested 40 percent each in A and B and 20
percent in C, what is the portfolio expected return? (Do
not round intermediate calculations and enter your answer as a
percent rounded to 2 decimal places, e.g.,...
Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A...
Rate of Return if State Occurs
State of Economy
Probability of
State of Economy
Stock A
Stock B
Stock C
Boom
0.76
0.29
0.33
0.31
Bust
0.24
0.15
0.11
0.09
Requirement 1:
What is the expected return on an equally weighted portfolio of
these three stocks? (Do not round your intermediate
calculations.)
26.36%
28.86%
38.39%
41.16%
20.63%
Requirement 2:
What is the variance of a portfolio invested 20 percent each in
A and B and 60 percent in...
State of Economy Probability of State of Economy Asset A Rate of Return Asset B Rate...
State of Economy
Probability of State of Economy
Asset A Rate of Return
Asset B Rate of Return
Boom
0.1
0.25
0.08
Normal
0.4
0.15
0.03
Recession
0.5
-0.08
-0.01
Question 3 (1 point)
What is the standard deviation for asset A?
Question 3 options:
Question 4 (1 point)
What is the standard deviation for asset B?
Question 4 options:
Question 5 (1 point)
What is the expected return of a portfolio that has 80% in Asset
A and 20%...
Consider the following information on three stocks: State of Economy Probability of State of Economy Rate...
Consider the following information on three stocks:
State of
Economy
Probability of
State of Economy
Rate of Return
if State Occurs
Stock A
Stock B
Stock C
Boom
.25
.27
.15
.11
Normal
.65
.14
.11
.09
Bust
.10
−.19
−.04
.05
A portfolio is invested 45 percent each in Stock A and Stock B
and 10 percent in Stock C. What is the expected risk premium on the
portfolio if the expected T-bill rate is 4.1 percent?
A.
8.71...
Consider the following information: State of Economy Probability of State of Economy Rate of Return if...
Consider the following information:
State of
Economy
Probability of
State of Economy
Rate of Return
if State Occurs
Stock A
Stock B
Recession
.04
.097
.102
Normal
.72
.114
.133
Boom
.24
.156
.148
The market risk premium is 7.4 percent, and the risk-free rate is
3.1 percent. The beta of Stock A is ________ and the beta of Stock
B is ________.
a) 1.25; 1.41
b) 1.47; 1.76
c) 1.21; 1.76
d) 1.25; 1.89
e) 1.47; 1.41
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