8. (Portfolio of two stocks) The following spreadsheet presents data for stocksA and B.ABC12RETURN STATISTICS OF STOCKS A AND BStock AStock B3Average return15%10%4 Variance0.120.075 Standard deviation34.64%26.46%67 Covariance of return, Cov(AIB)0.01600.1746 <=B7/(B5*C5)a.8 Correlation of returnWhat are the return and the standard deviation of a portfolio com-posed of 30% of stock A and 70% of stock B?b. What are the return and the standard deviation of an equally weightedportfolio of stocks A and B?

Step 1:The return of portfolio is the weighted average return of Stock A and Stock B. Standard…

Answered: 8. (Portfolio of two stocks) The…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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K -61 =1 2 N (Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Probability 0.25 0.50 0.25 Common Stock A Probability 0.25 0.25 0.25 0.25 (Click on the icon in order to copy its contents into a spreadsheet.) @ 2 a. Given the information in the table, the expected rate of return for stock A is 16.25 %. (Round to two decimal places.) The standard deviation of stock A is %. (Round to two decimal places.) b. The expected rate of return for stock B is%. (Round to two decimal places.) The standard deviation for stock B is%. (Round to two decimal places.) c. Based on the risk (as measured by the standard deviation) and return of each stock, which investment is better? (Select the best choice below.) 30² F2 W OA. Stock A is better because it has a higher expected rate of return with less risk B. Stock B is…
The following table has expected returns and variance-covariance of five stocks. The T-Bill rate is 3. Variance-Covariance Returns V F GM WMT Y V 27.226 588.659 -275.078 -319.948 -36.805 -93.170 F 11.653 -275.078 5716.621 22.772 56.588 52.187 GM 4.633 -319.948 22.772 729.510 569.730 -258.506 WMT 12.905 -36.805 56.588 569.730 932.361 367.376 Y 6.908 -93.170 52.187 -258.506 367.376 1466.966 T-Bill 3.000 questions a) determine the Tangency portfolio weights and calculate its expected return, standard deviation and Sharpe Ratio. Assume short sales are allowed. Write the equation of risk-return relations. b) determine the Tangency portfolio and calculate its expected return, standard deviation and Sharpe Ratio assuming…
1. 1- Calculate the beta adjusted by the degree of freedom for stock X relative to the equity market using the information from the table (performance): A B 0.82 1.22 42.07 Year 1 2 3 4 5 6 7 None of the options is true X -7 -11 21 15 8 9 -2 Market 7 15 20 17 10 7 -1
The index model has been estimated for stocks A and B with the following results: = 0.12 +0.670RM+еA RA= RB=0.04 +1.512RM + еB °M= 0.330 σ(eд) = 0.20 σ(eB) = 0.10 What is the covariance between each stock and the market index? (Round your answers to 4 decimal places.) Stock A covariance Stock B covariance
Suppose you are given the following information about 2 stocks, what is the Sharpe Ratio of a portfolio weighted 55% in stock A and 45% in stock B? E(RA)=16% E(RB)=8% σA=22% σB=12% σA,B=−0.003696 rf=3% Enter rate in decimal form, rounded to 4th digit, as in "0.1234"
please help with this question
Use the following information: Stock A B Good state 10% 14% Bad state 2% -2% Assume there is 60% probability that the good state occurs and 40% chance the bad state occurs. What is the standard deviation of stock A? (Please use 5 decimal places, this should be written in percentage, so an answer of 23.143% should be written as .23143)
Sh19 Please help me. Solution
A 277.
Suppose you are given the following information about 2 stocks, what is the return standard deviation of a portfolio weighted 55% in stock A and 45% in stock B? E(RA)=16% E(RB)=8% σA=22% σB=12% σA,B=−0.003696 Enter rate in decimal form, rounded to 4th digit, as in "0.1234"
Q4: Assume the following information for stocks A and B. • Expected return on Stock A = 18%. • Expected return on Stock B = 23%. • Correlation between returns of Stock A and Stock B = 0.10. • Standard deviation of returns on Stock A = 40%. • Standard deviation of returns on Stock B = 50%. Compute The expected return Standard deviation
Suppose that the Index model for stocks A and B is estimated from excess returns with the following results: RA 3.5% 8.65RM + A Rg -1.6% +0.88RM + ep OM 21%; R-squareд 0.22; R-squareg 0.14 What are the covariance and the correlation coefficient between the two stocks? Note: Do not round intermediate calculations. Calculate using numbers in decimal form, not percentages. Round your answers to 4 decimal places. Covariance Correlation coefficient

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