Question
In: Finance
A stock price is currently $60. Assume that the expected return from the stock is 17%...
A stock price is currently $60. Assume that the expected
return from the stock is 17% per annum and its volatility is 25%
per annum. what is the probability distribution for the stock price
in two years? Calculate the mean and standard deviation of the
distribution. Determine the 95% confidence interval
Solutions
jeff jeffy answered 1 year agoRelated Solutions
A stock price is currently $60. Assume that the expected return from the stock is 15%...
A stock price is currently $60. Assume that the expected
return from the stock is 15% and its volatility is 25% per
annum.
What is the probability distribution of the stock price, ST,
in six months?
Φ ( μ, σ2 ) = Φ ( , )
Calculate a 95% (with 1.96 standard deviation) confidence
interval of the stock price, ST, in six months.
What is the probability that a six-month European call option
on the stock with an exercise price...
Assume that the CAPM is a good description of stock price returns. The market expected return...
Assume that the CAPM is a good description of stock price
returns. The market expected return is 7% with 10% volatility and
the risk-free rate is 3%. New news arrives that does not change any
of these numbers but it does change the expected return of the
following stocks
Expected Return
Volatility
Beta
Green Leaf
12%
20%
1.50
NatSam
10%
40%
1.80
HanBel
9%
30%
0.75
Rebecca Automobile
6%
35%
1.20
a. At current market prices, which stocks represent buying...
Stock A has an expected return of 17% and a standard deviationof 33%. Stock B...
Stock A has an expected return of 17% and a standard deviation
of 33%. Stock B has an expected return of 13% and a standard
deviation of 17%. The risk-free rate is 2.2% and the correlation
between Stock A and Stock B is 0.5. Build the optimal risky
portfolio of Stock A and Stock B. What is the standard deviation of
this portfolio?
Stock A has an expected return of 17% and a standard deviation of 29%. Stock B...
Stock A has an expected return of 17% and a standard deviation
of 29%. Stock B has an expected return of 14% and a standard
deviation of 18%. The risk-free rate is 2.8% and the correlation
between Stock A and Stock B is 0.3. Build the optimal risky
portfolio of Stock A and Stock B. What is the expected return on
this portfolio?
: A stock price is currently $60. It is known that at the end of eight...
: A stock price is currently $60. It is known that at the end of
eight months it will be either $65 or $55. The risk-free interest
rate is 8% per annum with continuous compounding. (1) What is the
value of an eight-month European put option with a strike price of
$60? (2) Verify that no-arbitrage arguments and risk-neutral
valuation arguments give the same answers.
Assume that you manage a risky portfolio with an expected rate of return of 17% and...
Assume that you manage a risky portfolio with an expected rate
of return of 17% and a standard deviation of 27%. The T-bill rate
is 7%. Your client chooses to invest 70% of a portfolio in your
fund and 30% in a T-bill money market fund.
QUESTION 12 What is the Sharpe ratio of your risky portfolio? A.
27% B. 37% C. 19.32% D. 62.9% E. 17.58% 4 points
QUESTION 13 What is the Sharpe ratio of your overall portfolio?...
Assume that you manage a risky portfolio with an expected rate of return of 17% and...
Assume that you manage a risky portfolio with an expected rate
of return of 17% and a standard deviation of 35%. The T-bill rate
is 4.5%.
A client prefers to invest in your portfolio a proportion
(y) that maximizes the expected return on the overall
portfolio subject to the constraint that the overall portfolio's
standard deviation will not exceed 25%.
What is the expected rate of return on your client's overall
portfolio?
Expected rate of return?
Assume that you manage a risky portfolio with an expected rate of return of 17% and...
Assume that you manage a risky portfolio with an expected rate
of return of 17% and a standard deviation of 33%. The T-bill rate
is 6%. Your client chooses to invest 75% of a portfolio in your
fund and 25% in a T-bill money market fund.
a. What is the expected return and standard deviation of your
client's portfolio? (Round your answers to 2 decimal
places.)
Expected return % per year
Standard deviation % per year
b. Suppose your risky...
Assume that you manage a risky portfolio with an expected rate of return of 17% and...
Assume that you manage a risky
portfolio with an expected rate of return of 17% and a standard
deviation of 27%. The T-bill rate is 7%. Suppose that you have a
client that prefers to invest in your risky portfolio a proportion
(y) of his total investment budget so that his overall portfolio
will have an expected rate of return of 15%. (1) What is the
investment proportion, y? (2.) What is the standard deviation of
the rate of return...
You have a three-stock portfolio. Stock A has an expected return of 17 percent and a...
You have a three-stock portfolio. Stock A has an expected return
of 17 percent and a standard deviation of 38 percent, Stock B has
an expected return of 20 percent and a standard deviation of 56
percent, and Stock C has an expected return of 15 percent and a
standard deviation of 38 percent. The correlation between Stocks A
and B is 0.30, between Stocks A and C is 0.20, and between Stocks B
and C is 0.05. Your portfolio...
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