Question
In: Finance
Nancy is trying to create a portfolio of two stocks that would move with the overall...
Nancy is trying to create a portfolio of two stocks that would move with the overall market. The four stocks and their correponding Betas are as follows:
Apple: Beta: 1.17
AT&T: .67
Salesforce: 1.35
Con Edison: .24
Of the two stocks portfolios listed below, which choice portfolio would move closely with the overall market?
|
Portfolio of Salesforce & AT&T |
||
|
Portfolio of AT&T and Con Edison |
||
|
Portfolio of Salesforce & Con Edison |
||
|
Portfolio of Salesforce and Apple |
Solutions
Expert Solution
a. Beta of 4 stocks are given and a portfolio of 2 stocks to be created which would move closely with the overall market.
b. We will have a possible combination of 6 portfolios as given below.
c. Since the investment proportion of each stock in portfolio is not provided, we assume equal weightage (50% and 50%)
d. To move closely with the overall market, beta of the portfolio have to be 1 or closer to 1.
e. The beta of the portfolio is the weighted average of the individual stock betas.
The beta of Salesforce & AT&T is 1.01 which is the closest to 1. Thus this portfolio will move closely with the overall market.
Thus the answer is Portfolio of Salesforce & AT&T
jeff jeffy answered 1 year agoRelated Solutions
Create a portfolio using the four stocks and information below:
Create a portfolio using the four stocks and information below: (Do not round intermediate calculations. Record your answers in decimal form and round your answers to 4 decimal places. Ex. X.XXXX)What is the variance of A?What is the variance of B?What is the variance of C?What is the variance of D?What is the Correlation (A,A)?What is the Correlation (B,B)?What is the Correlation (C,C)?What is the Correlation (D,D)?What is the Covariance (A,A)?What is the Covariance (A,B)?What is the Covariance (A,C)?What is the...
Create a portfolio using the two stocks and information below: Expected Return Standard Deviation Weight in...
Create a portfolio using the two stocks and information
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Expected Return
Standard Deviation
Weight in Portfolio
Stock A
34.00%
19.00%
90.00%
Stock B
9.00%
38.00%
10.00%
----------------------
----------------------
----------------------
----------------------
Correlation (A,B)
0.1500
----------------------
----------------------
(Do not round intermediate calculations. Record your
answers in decimal form and round your answers to 4 decimal places.
Ex. x.xxxx)
What is the variance of A?
What is the variance of B?
What is the Correlation (A,A)?
What is the Correlation (B,B)?
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Create a portfolio using the two stocks and information below: Expected Return Standard Deviation Weight in...
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below:
Expected Return
Standard Deviation
Weight in Portfolio
Stock A
33.00%
14.00%
81.00%
Stock B
24.00%
25.00%
19.00%
----------------------
----------------------
----------------------
----------------------
Correlation (A,B)
0.9600
----------------------
----------------------
(Do not round intermediate calculations. Record your
answers in decimal form and round your answers to 4 decimal places.
Ex. x.xxxx)
What is the variance of A?
What is the variance of B?
What is the Correlation (A,A)?
What is the Correlation (B,B)?
What...
Create a portfolio using the two stocks and information below: Expected Return Standard Deviation Weight in...
Create a portfolio using the two stocks and information
below:
Expected Return
Standard Deviation
Weight in Portfolio
Stock A
35.00%
11.00%
78.00%
Stock B
26.00%
30.00%
22.00%
----------------------
----------------------
----------------------
----------------------
Correlation (A,B)
0.8900
----------------------
----------------------
(Do not round intermediate calculations. Record your
answers in decimal form and round your answers to 4 decimal places.
Ex. x.xxxx)
What is the variance of A?
What is the variance of B?
What is the Correlation (A,A)?
What is the Correlation (B,B)?
What...
Create a portfolio using the two stocks and information below: Expected Return Standard Deviation Weight in...
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below:
Expected Return
Standard Deviation
Weight in Portfolio
Stock A
8.00%
11.00%
42.00%
Stock B
9.00%
32.00%
58.00%
----------------------
----------------------
----------------------
----------------------
Correlation (A,B)
0.1300
----------------------
----------------------
(Do not round intermediate calculations. Record your
answers in decimal form and round your answers to 4 decimal places.
Ex. x.xxxx)
What is the variance of A?
What is the variance of B?
What is the Correlation (A,A)?
What is the Correlation (B,B)?
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Create a portfolio using the two stocks and information below: Expected Return Standard Deviation Weight in...
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Expected Return
Standard Deviation
Weight in Portfolio
Stock A
21.00%
28.00%
19.00%
Stock B
23.00%
10.00%
81.00%
----------------------
----------------------
----------------------
----------------------
Correlation (A,B)
0.0500
----------------------
---------------------
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