Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently of each other. For both types of firm there is a 60% probability that the firm will have a 20% return and a 40% probability that the firm will have a -30% return. The standard deviation for the return on a portfolio of 20 type S firms is closest to: 24% 23% 15% 35%

Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently of each other. For both types of firm there is a 60% probability that the firm will have a 20% return and a 40% probability that the firm will have a -30% return. The standard deviation for the return on a portfolio of 20 type S firms is closest to: 24% 23% 15% 35%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 2P: APT An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free...

See similar textbooks

Similar questions

Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently. For both types of firms, there is a 60% probability that the firm will have a 21% return. Otherwise, the firm will have a -20% return. The standard deviation for the return on a portfolio of 20 type S firms is closest to:
Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 60% probability that the firm will have a 15% return and a 40% probability that the firm will have a −10% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 20 firms of type S? b. 20 firms of type I?
Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently of each other. For both types of firms there is a 40% probability that the firm will have a 20% return and a 60% probability that the firm will have a -30% return. The standard deviation for the return on an individual firm is closest to A) -10.00% B) 24.49% C) 9.80% D) 12.25%
Use the information for the question(s) below. Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently of each other. For both types of firm there is a 70% probability that the firm will have a 20% return and a 30% probability that the firm will have a -30% return. The standard deviation for the return on a portfolio of 20 type S firms is closest to: Question content area bottom Part 1 A. 23.0%. B. 5.10%. C. 5.25%. D. 15.0%.
Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 64% probability that the firm will have a 25% return and a 36% probability that the firm will have a -2% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 40 firms of type S? b. 40 firms of type l? a. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 40 firms of type S? Standard deviation is%. (Round to two decimal places.)
Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 60% probability that the firm will have a 15% return and a 40% probability that the firm will have a -10% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 20 firms of type S? b. 20 firms of type l?
Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 39% probability that the firm will have a 27 % return and a 61 % probability that the firm will have a-18% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 22 firms of type S? b. 22 firms of type I? a. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 22 firms of type S? Standard deviation is %. (Round to two decimal places.) b. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 22 firms of type I? Standard deviation is _ %. (Round to two decimal places.)
Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 49% probability that the firm will have a 30% return and a 51% probability that the firm will have a - 7% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 31 firms of type S? b. 31 firms of type I?
Consider an economy with two types of companies, S and I. The profits of companies S always move together, but the profits of companies I move independently of each other. For both firms, there is a 70% probability that the firm's return is 30%, and a 30% probability that the return is -30%. The standard deviation of an individual company's return is closest to the value: Choose one: A.23.0% B.5.25% C.15.0% D.10.0% Only typed answer
K Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 29% probability that the firm will have a 24% return and a 71% probability that the firm will have a -11% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 40 firms of type S? b. 40 firms of type I? a. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 40 firms of type S? Standard deviation is%. (Round to two decimal places.) b. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 40 firms of type I? Standard deviation is %. (Round to two decimal places.)
A manager believes his firm will earn a return of 20.30 percent next year. His firm has a beta of 1.36, the expected return on the market is 15.90 percent, and the risk-free rate is 5.90 percent. Compute the return the firm should earn given its level of risk. (Round your answer to 2 decimal places.) Required return %
Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 10%, and all stocks have independent firm-specific components with a standard deviation of 40%. Portfolios A and B are both well-diversified with the following properties: Portfolio Beta on F1 Beta on F2 Expected Return A 1.6 2.0 30 % B 2.5 –0.20 25 % What is the expected return-beta relationship in this economy? Calculate the risk-free rate, rf, and the factor risk premiums, RP1 and RP2, to complete the equation below. (Do not round intermediate calculations. Round your answers to two decimal places.)E(rP) = rf + (βP1 × RP1) + (βP2 × RP2)