a. the expected return and b. the volatility(standard deviation) of a portfolio that consists of a long position of $12,000 in Johnson & Johnson and a short position of $2,000 in Walgreens.
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Suppose Johnson & Johnson and Walgreen Boots Alliance have expected returns and volatilities shown here, with a correlation of 20%. Calculate a. the expected return and b. the volatility(standard deviation) of a portfolio that consists of a long position of $12,000 in Johnson & Johnson and a short position of $2,000 in Walgreens.
Expected Return Standard Deviation
Johnson & Johnson 7.7% 16.5%
Walgreens 9.4% 19.2%
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- Suppose Johnson & Johnson and the Walgreen Company have the expected retums and volatilities shown below, with a correlation of 22.0%. EIR 7.0% SD(R 16.0% 20.0% Johnson & Johnson Walgreen Company 10.0% For a portfolio that is equally invested in Johnson & Johnson's and Walgreen's stock, calculate: a. The expected return. b. The volatility (standard deviation). a. The expected return. The expected return of the portfolio is %. (Round to one decimal place.) Print Screen F11 F12 F10 F8 F5 F6 F2 Backspace & % %2$ 4 6. 5 USuppose Johnson & Johnson and the Walgreen Company have the expected returns and volatilities shown below, with a correlation of 21.4%. E [R] SD [R] Johnson & Johnson 6.8% 15.2% Walgreen Company 10.5% 19.8% For a portfolio that is equally invested in Johnson & Johnson's and Walgreen's stock, calculate: a. The expected return. b. The volatility (standard deviation). a. The expected return. The expected return of the portfolio is %. (Round to one decimal place.) b. The volatility (standard deviation). The volatility of the portfolio is %. (Round to one decimal place.)Suppose Johnson & Johnson and the Walgreen Company have the expected returns and volatilities shown below, with a correlation of 22.2%. Johnson & Johnson Walgreen Company E [R] 7.2% 9.3% SD [R] 16.8% 20.4% For a portfolio that is equally invested in Johnson & Johnson's and Walgreen's stock, calculate: a. The expected return. b. The volatility (standard deviation). a. The expected return. The expected return of the portfolio is ☐ %. (Round to one decimal place.) b. The volatility (standard deviation). The volatility of the portfolio is %. (Round to one decimal place.)
- Suppose Johnson & Johnson and the Walgreen Company have the expected returns and volatilities shown below, with a correlation of 22.4%. Johnson & Johnson Walgreen Company E [R] 6.5% 10.7% SD [R] 15.5% 19.9% For a portfolio that is equally invested in Johnson & Johnson's and Walgreen's stock, calculate: a. The expected return. b. The volatility (standard deviation). a. The expected return. The expected return of the portfolio is %. (Round to one decimal place.)Here are some historical data on the risk characteristics of Ford and Harley Davidson. Harley Davidson Ford B (beta) Yearly standard deviation of return (%) 1.26 0.67 30.6 15.8 Assume the standard deviation of the return on the market was 13.0% a. The correlation coefficient of Ford's return versus Harley Davidson is 0.39. What is the standard deviation of a portfolio invested half in each share? b. What is the standard deviation of a portfolio invested one-third in Ford, one-third in Harley Davidson, and one-third in risk-free Treasury bills? c. What is the standard deviation if the portfolio is split evenly between Ford and Harley Davidson and is financed at 50% margin, that is, the investor puts up only 50% of the total amount and borrows the balance from the broker? d-1. What is the approximate standard deviation of a portfolio composed of 100 stocks with betas of 1.26 like Ford? d-2. What is the approximate standard deviation of a portfolio composed of 100 stocks with betas of…Here are some historical data on the risk characteristics of Ford and Harley Davidson. Ford Harley Davidson β (beta) 1.26 0.69 Yearly standard deviation of return (%) 30.9 16.9 Assume the standard deviation of the return on the market was 12.0%. a. The correlation coefficient of Ford’s return versus Harley Davidson is 0.27. What is the standard deviation of a portfolio invested half in each share? b. What is the standard deviation of a portfolio invested one-third in Ford, one-third in Harley Davidson, and one-third in risk-free Treasury bills? c. What is the standard deviation if the portfolio is split evenly between Ford and Harley Davidson and is financed at 50% margin, that is, the investor puts up only 50% of the total amount and borrows the balance from the broker? d-1. What is the approximate standard deviation of a portfolio composed of 100 stocks with betas of 1.26 like Ford? d-2. What is the approximate standard deviation of a portfolio composed of…
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- a. Based on the following information, calculate the expected return and standard deviation for each of the following stocks. What are the covariance and correlation between the returns of the two stocks? Calculate the portfolio returm and portfolio standard deviation if you invest equally in each asset. Returns State of Economy Prob J K Recession 0.25 -0.02 0.034 Normal 0.6 0.138 0.062 Boom 0.15 0.218 0.092 b. A portfolio that combines the risk-free asset and the market portfolio has an expected return of percent and a standard deviation of 10 percent. The risk-free rate is 4 percent, and the Page 7 of 33 expected return on the market portfolio is 12 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a 45 corelation with the market portfolio and a standard deviation of 55 percent? C. Suppose the risk-free rate is 4.2 percent and the market portfolıo has an expected return of 10.9 mercent Tibemadkat normfeliobasiabiamance…Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 34% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 2%. x Ao². Calculate the utility levels of each portfolio for an investor with A = 2. Assume the utility function is U = E(r) - 0.5 × Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Negative amounts should be indicated by a minus sign. W Bills 0.0 0.2 0.4 0.6 0.8 1.0 WIndex 1.0 0.8 0.6 0.4 0.2 0.0 U(A = 2)1. Given the following summary statistics, Mean S.D. 1.235 0.997 Asset A 0.52 Asset B. 0.44 (a) If the correlation between the two financial series is 0.25. What are the optimal portfolio weights to minimize risk? (b) What are the expected return and standard deviation of the optimal port- folio? (c) Compute the 1% Value-at-Risk for the next 5 days (d) Compute the expected shortfall