Question
In: Finance
The expected return and standard deviation of a portfolio that is 50 percent invested in 3...
The expected return and standard deviation of a portfolio that is 50 percent invested in 3 Doors, Inc., and 50 percent invested in Down Co. are the following: 3 Doors, Inc. Down Co. Expected return, E(R) 14 % 11 % Standard deviation, σ 47 36 What is the standard deviation if the correlation is +1? 0? −1? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Correlation +1 % Correlation 0 % Correlation −1 %
Solutions
Expert Solution
Standard deviation of a portfolio is mathematically represented as:
a) When correlation = +1
Standard deviation = 41.50%
b) When correlation = 0
Standard deviation = 29.60%
c) When correlation = -1
Standard deviation = 5.50%
jeff jeffy answered 2 years agoRelated Solutions
The expected return and standard deviation of a portfolio that is 50 percent invested in 3...
The expected return and standard deviation of a portfolio that
is 50 percent invested in 3 Doors, Inc.,and 50 percent invested in
Down Co. are the following: 3 Doors, Inc. Down Co. Expected return,
E(R) 14 % 10 % Standard deviation, σ 42 31 What is the standard
deviation if the correlation is +1? 0? −1?
The expected return and standard deviation of a portfolio that is 70 percent invested in 3...
The expected return
and standard deviation of a portfolio that is 70 percent invested
in 3 Doors, Inc., and 30 percent invested in Down Co. are the
following:
3
Doors, Inc.
Down Co.
Expected return, E(R)
12
%
10
%
Standard deviation, σ
45
34
What is the standard
deviation if the correlation is +1? 0? −1?
The expected return and standard deviation of a portfolio that is 40 percent invested in 3...
The expected return and standard deviation of a portfolio that
is 40 percent invested in 3 Doors, Inc., and 60 percent invested in
Down Co. are the following:
3 Doors, Inc.
Down Co.
Expected return, E(R)
15
%
11
%
Standard deviation, σ
48
37
What is the standard deviation if the correlation is +1? 0? −1?
(Do not round intermediate calculations. Enter your answer
as a percent rounded to 2 decimal places. )
Standard Deviation
Correlation +1
%
Correlation...
The expected return and standard deviation of a portfolio that is 40 percent invested in 3...
The expected return and standard deviation of a portfolio that
is 40 percent invested in 3 Doors, Inc., and 60 percent invested in
Down Co. are the following: 3 Doors, Inc. Down Co. Expected return,
E(R) 15 % 14 % Standard deviation, σ 58 32 What is the standard
deviation if the correlation is +1? 0? −1? (Do not round
intermediate calculations. Enter your answer as a percent rounded
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If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio expected return? The variance? The standard deviation?
Consider the following information about three
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State of Economy
Probability of State of Economy
Rate of Return If State Occurs
Stock A
Stock B
Stock C
Boom
.25
.21
.36
.55
Normal
.60
.17
.13
.09
Bust
.15
.00
−.28
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If your portfolio is invested 40 percent each in A and
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If the expected T-bill rate is 3.80 percent, what is...
Calculate the expected return and standard deviation of a portfolio comprised of $4,500 invested in stock...
Calculate the expected return and standard deviation of a
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Probability of State of Economy
Rate of Return if State Occurs (Stock S)
Rate of Return if State Occurs (Stock T)
Boom
10%
12%
4%
Normal
65%
9%
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25%
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Consider the following information:
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Probability of State of Economy
Stock A
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Stock C
Boom
.05
0.55
0.60
0.47
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Poor
.35
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-0.06
-0.04
Bust
.45
-0.12
-0.10
-0.09
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Using the following information, calculate the expected return and standard deviation of a portfolio with 50...
Using the following information, calculate the expected return
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deviation of a portfolio where you invest 40 percent in ABC, 40
percent in DEF, and the rest in T-bills with a return of 3.5
percent.
State of the Economy
Probability
ABC Stock Return (%)
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Recession
0.2
-2
2
Normal
0.4...
The market portfolio has an expected return of 11 percent and a standard deviation of 19...
The market portfolio has an expected return of 11 percent and a
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Calculate the expected return and standard deviation of the portfolio.
A portfolio consists of two stocks:
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Stock 2 13% 20% ???
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Calculate the expected return and standard deviation of the portfolio.
Expected Return:
Standard Deviation:
(i) Briefly explain, in general, when there would be “benefits of diversification” (for any portfolio of two securities).
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