Consider the following probability distribution for stocks A and B:StateProbabilityReturn on Stock AReturn on Stock B10.1010%8%20.2013%7%30.2012%6%40.3014%9%50.2015%8%The coefficient of correlation between A and B is:

the correlation coefficient is approximately 0.47. Explanation: First, we calculate the expected…

Answered: Consider the following probability…

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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State	Probability	Return on Stock A	Return on Stock B
1	0.10	10%	8%
2	0.20	13%	7%
3	0.20	12%	6%
4	0.30	14%	9%
5	0.20	15%	8%

Similar questions

Consider the following probability distribution for stocks A and B: State Return on Stock A 1 10% 2 13% 3 12% 4 14% 5 15% 0.46. The coefficient of correlation between A and B is 0.60. 0.58. 1.20. Probability 0.10 0.5. 0.20 0.20 0.30 0.20 Return on Stock B 8% 7% 6% 9% 8%
The index model has been estimated for stocks A and B with the following results: RA = 0.12 + 0.610RM + eA RB = 0.04 + 1.416RM + eB σM = 0.270 σ(eA) = 0.20 σ(eB) = 0.10 What is the covariance between each stock and the market index?
The metric that is used to show the extent to which a given stock’s return move up and down with the stock market? a. Correlation b. Beta c. Standard deviation d. Expected return
Suppose that the index model for stocks A and B is estimated from excess returns with the following results:RA = 3% + .7RM + eARB = −2% + 1.2RM + eBσM = 20%; R-squareA = .20; R-squareB = .12What are the covariance and the correlation coefficient between the two stocks?
You are given the following information concerning a stock and the market Year 2017 2018 2019 2020 2021 2022 Returns Market 18% 11 12 -14 37 15 Correlation Beta a. Calculate the average return and standard deviation for the market and the stock. Note: Use Excel to complete the problem. Enter your answers as a percent rounded to 2 decimal places. Average return Standard deviation Stock 34% 27 3 -21 16 22 Market % Stock % % b. Calculate the correlation between the stock and the market, as well as the stock's beta. Note: Use Excel to complete the problem. Round your correlation answer to 2 decimal places and beta answer to 4 decimal places.
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA= 3.2% + 1.10RM + eA RB = -1.4 % + 1.25RM + eB OM= 30%; R-squareд = 0.28; R-squareg = 0.12 What is the covariance between each stock and the market index? Note: Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is provided as 20%. Do not round your intermediate calculations. Round your answers to nearest whole number. Answer is complete but not entirely correct. Stock A Stock B Covariance 93 x 101 x
Suppose that the index model for stocks A and B is estimated from excess returns with the following results:RA = 3% + .7RM + eARB = −2% + 1.2RM + eBσM = 20%; R-squareA = .20; R-squareB = .12What is the covariance between each stock and the market index?
Suppose the beta estimated from the CAPM for stock A is 2.3 and stock B is 1.1. What is the beta of an equally weighted stock portoflio of A and B stock?
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?
a. Calculate the expected return for Stock media Prima and Stock Astro 2. Calculate the standard deviation for Stock media Prima and Stock Astro 3. Calculate the covariance and correlation of coefficient for the above stock.
The market and Stock A have the following probability distributions: Probability Return on market Return on Stock A 0.2 18% 16% 0.3 12% 14% 0.5 10% 11% Calculate the expected rates of return for the market and Stock A. Calculate the coefficient of variation for the market and Stock A (Standard deviation for market is 3.0265% and standard deviation for Stock A is 2.0224%).
Stock A Stock BRate of Return Probability Rate of Return Probability14 0.15 20 0.2016 0.20 18 0.1817 0.30 16 0.3219 0.15 14 0.1420 0.20 10 0.16 a. Calculate the expected return for both stock A and stock B b. Calculate the standard deviation for both stock A and stock B c. Calculate the coefficient of variation for both stock A and stock B.

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Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10% 8% 2 0.20 13% 7% 3 0.20 12% 6% 4 0.30 14% 9% 5 0.20 15% 8% The coefficient of correlation between A and B is: