Consider the following information: State Probability Stock A Stock B Stock C Boom 0.32 0.25 0.14 0.07 Bust 0.68 -0.04 0.1 0 What is the expected return of a portfolio that has invested $11,398 in Stock A, $19,459 in Stock I and $10,981 in Stock C? (Hint: calculate weights of each stock first). Enter the answer with 4 decimals (e.g. 0.1234).

Consider the following information: State Probability Stock A Stock B Stock C Boom 0.32 0.25 0.14 0.07 Bust 0.68 -0.04 0.1 0 What is the expected return of a portfolio that has invested $11,398 in Stock A, $19,459 in Stock I and $10,981 in Stock C? (Hint: calculate weights of each stock first). Enter the answer with 4 decimals (e.g. 0.1234).

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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Consider information given in the table below and answers the question asked thereafter: State Probability return on stock A Return on stock B A 0.15 10% 9% B 0.15 6% 15% C 0.10 20% 10% D 0.18 5% -8% E 0.12 -10% 20% F 0.30 8% 5% i. Calculate expected return on each stock? On the basis of this measure, which stockyou will choose?ii. Calculate standard deviation of the returns on each stock? On the basis of thismeasure, which stock you will choose?iii. Calculate coefficient of variance of the returns on each stock? On the basis of thismeasure, which stock you will choose?
Consider information given in the table below and answers the question asked thereafter: State Probability return on stock A Return on stock B A 0.15 10% 9% B 0.15 6% 15% C 0.10 20% 10% D 0.18 5% -8% E 0.12 -10% 20% F 0.30 8% 5% Calculate covariance and coefficient of correlation between the returns of thestocks A and B.v. Now suppose you have $100,000 to invest and you want to a hold a portfoliocomprising of $45,000 invested in stock A and remaining amount in stock B.Calculate risk and return of your portfolio.
You have estimated the following probability distributions of expected future returns for Stocks X and Y: Stock X Stock Y Probability Return Probability Return 0.1 -12 % 0.2 4 % 0.1 11 0.2 7 0.3 14 0.3 11 0.3 30 0.2 17 0.2 40 0.1 30 What is the expected rate of return for Stock X? Stock Y? Round your answers to one decimal place.Stock X: % Stock Y: % What is the standard deviation of expected returns for Stock X? For Stock Y? Round your answers to two decimal places.Stock X: % Stock Y: % Which stock would you consider to be riskier? is riskier because it has a standard deviation of returns.
You are given the following probability distribution of returns for a stock. Use the data to calculate the expected return, standard deviation of returns, and coefficient of variation of returns for the stock. Report the CV to 4 decimal places (13.36% = 0.1336). Return Probability 8.0% 0.20 10.0% 0.10 12.0% 0.40 15.0% 0.20 16.0% 0.10
Stocks A and B have expected returns of 0.119 and 0.133, respectively. You form a portfolio consisting of $5,000 in Stock A and $6,000 in Stock B. What is your portfolio's expected return? Enter your answer as a decimal and show 4 decimal places. Type your answer... Previous
Following are the probability distribution of returns of portfolio of Stock A and Stock B in equal proportion of weight in each state of economy. You are required to calculate Expected Return and Risk for individual Stocks? State of Economy 1 2 3 4 5 Probability 0.2 0.2 0.2 0.2 0.2 Return on Stock A (%) 15 (5) 5 35 25 Return on Stock B (%) (5) 15 25 5 35 If you deposit Rs. 1,000 in the bank at a nominal interest rate of 6 percent, you will have Rs. 1,060 at the end of the year. Suppose that the inflation rate during the year is also 6 percent. Find real amount in Peso?
Problem 2: You are given the following probability distribution for a stock: Pr. Outcome 4 -4% .6 12% A. Compute the expected return B. Compute the standard deviation C. Presuming the stock returns are normally distributed, what do these results indicate?
What are the expected returns for stocks Y and Z under the conditions shown below? A0 0.04 k1 0.07 k2 0.05 by,1 0.5 by,2 1.3 bz,1 1.2 bz,2 0.9
Suppose you are given the following information about 2 stocks, what is the expected return 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"
Given the returns and probabilities for the three possible states listed below, calculate the covariance between the returns of Stock A and Stock B. For convenience, assume that the expected returns of Stock A and Stock B are 8.10 percent and 11.60 percent, respectively. (Round answer to 4 decimal places, e.g. 0.0768.) Good OK Poor Covariance Probability 0.22 0.60 0.18 Return on Stock A 0.30 0.10 -0.25 Return on Stock B 0.50 0.10 -0.30
b) Suppose that you observe the following information in Table 2 for stocks A and B: Table 2 Expected Return (%) 11% Stock Beta A 0.8 В 14% 1.5 The risk-free rate of return is 6% and the expected rate of return on the market index is 12%. Using the Single-Index Model, calculate the alpha of both stocks. Show your calculations. Explain what the alpha of the single-factor model represents and interpret your results.
You own a portfolio that has $1,331 invested in Stock A and $2,857 invested in Stock B. If the expected returns on these stocks are 0.08 and -0.01, respectively, what is the expected return on the portfolio? Enter the answer with 4 decimals (e.g. 0.1234).

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