Question

In: Finance

The standard deviation of the market-index portfolio is 45%. Stock A has a beta of 1.20...

The standard deviation of the market-index portfolio is 45%. Stock A has a beta of 1.20 and a residual standard deviation of 55%.


a. Calculate the total variance for an increase of 0.20 in its beta. (Do not round intermediate calculations. Round your answer to 4 decimal places.)



b. Calculate the total variance for an increase of 8.86% in its residual standard deviation. (Do not round intermediate calculations. Round your answer to 4 decimal places.)

I got .6994 for both but it keeps saying im wrong.

Solutions

Expert Solution

As far as i know, first and second answer should match, but i am getting, both answers different. May be faculty has changed value a bit.

check my calculations. Thank you.

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

The standard deviation of the market index portfolio is 10%. Stock A has a beta of...
The standard deviation of the market index portfolio is 10%. Stock A has a beta of 2 and a residual standard deviation of 20%. A) calculate the total variance for an increase of .10 in its beta. B) calculate the total variance for an increase of 1% in its residual standard deviation.
The standard deviation of the market-index portfolio is 20%. Stock A has a beta of 2.00,...
The standard deviation of the market-index portfolio is 20%. Stock A has a beta of 2.00, and a residual standard deviation of 30%. a.Calculate the total variance for increase of 0.10 in its beta. b.Calculate the total variance for an increase of 2.62% in its residual standard deviation. (Do not round intermediate calculations. Round your answers to the nearest whole number.)
Suppose investors believe that the standard deviation of the market-index portfolio has increased by 50%. Speculate...
Suppose investors believe that the standard deviation of the market-index portfolio has increased by 50%. Speculate on two potential implications of the Security Market Line (SML) and CAPM regarding the effect of this change on the required rate of return for a company’s investment projects
stock a has a beta of 1.6 and a standard deviation of 25%. stock b has...
stock a has a beta of 1.6 and a standard deviation of 25%. stock b has a beta of 1.4 and a standard deviation of 20%. portfolio ab was created by investing in a combination of stocks a and b. portfolio ab has a beta of 1.25 and a standard deviation of 18%. which of the following statements is correct? Stock A has more market risk than Portfolio AB. Stock A has more market risk than Stock B but less...
Portfolio            Average Return      Standard Deviation   Beta    A                &nb
Portfolio            Average Return      Standard Deviation   Beta    A                             14.7%                     18.6%                 1.47    B                               8.8                           14.2                  .78    C                             11.2                           16.0                 1.22 The risk-free rate is 4.5 percent and the market risk premium is 7 percent. What is the Treynor ratio of a portfolio comprised of 30 percent portfolio A, 20 percent portfolio B, and 50 percent portfolio C? SHOW WORK
A stock has an expected return of 1%, a beta of 1.3, and a standard deviation...
A stock has an expected return of 1%, a beta of 1.3, and a standard deviation of 19%. The risk-free rate is 4.5%. What is the market risk premium? 5.77% 6.11% 5.11% 4.79% 4.29%
The stock of Nugents Nougats currently sells for $45 and has an annual standard deviation of...
The stock of Nugents Nougats currently sells for $45 and has an annual standard deviation of 46 percent. The stock has a dividend yield of 5.4 percent and the risk-free rate is 5.4 percent. What is the value of a call option on the stock with a strike price of $41 and 46 days to expiration?
The expected return of market portfolio is 10%. The standard deviation of market portfolio is 20%....
The expected return of market portfolio is 10%. The standard deviation of market portfolio is 20%. Risk free interest rate is 2%. There is an investor with mean-variance utility function  Answer the following questions. 1) Calculate the optimal weight to be invested in the market portfolio for the investor with A=5 . Calculate the expected return and standard deviation of the optimal complete portfolio for the investor. 2) According to the CAPM, calculate the expected returns of two stocks (stock 1...
Neon Corporation’s stock returns have a covariance with the market portfolio of .0345. The standard deviation...
Neon Corporation’s stock returns have a covariance with the market portfolio of .0345. The standard deviation of the returns on the market portfolio is 25 percent, and the expected market risk premium is 8.8 percent. The company has bonds outstanding with a total market value of $55.13 million and a yield to maturity of 7.8 percent. The company also has 4.63 million shares of common stock outstanding, each selling for $23. The company’s CEO considers the current debt–equity ratio optimal....
Neon Corporation’s stock returns have a covariance with the market portfolio of .0345. The standard deviation...
Neon Corporation’s stock returns have a covariance with the market portfolio of .0345. The standard deviation of the returns on the market portfolio is 25 percent, and the expected market risk premium is 8.8 percent. The company has bonds outstanding with a total market value of $55.13 million and a yield to maturity of 7.8 percent. The company also has 4.63 million shares of common stock outstanding, each selling for $23. The company’s CEO considers the current debt–equity ratio optimal....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT