If beta of Stock A with market is 0.72 and and the market variance is 225 , the covariance between A and B is 202.5, beta of stock B with market is

Q: Suppose Stock A has an expected return of 18% and a variance of 0.17, while Stock B has an expected…

A: Expected return of a portfolio is calculated as the sum of their weighted returns. It can be…

Q: If correlation coefficient between an individual security and market is 0.64, the total risk of the…

A: The question related to Portfolio Management.

Q: In a regression of the single-index model, the R-square is 68%, residual variance is 0.08, beta…

A: R square = 68% = 0.68 residual variance (σe^2)= 0.08 Beta (B) = 0.7 Let σm^2 = Market variance

Q: a covariance of 0.011. If their respective standard deviations are 13% and 22%, what is their…

A: Given, Covariance = 0.011 Standard deviation of security 1 = 13% or 0.13 Standard deviation of…

Q: if the covariance of a stock A with the market M is 0.15 and the standard deviation of the market…

A: Covarianceof  a stock A with the market M=0.15Standard devation=36%

Q: A single stock, A has a variance of 0.006 and a covariance with the market portfolio given by 0.013.…

A:

Q: What is the total variance of the following portfolio including 2 assets invested in the ratio of…

A: Formula to be used: Portfolio variance=(WA2 x σ2A)+(WB2 x σ2B)+ (2 x WA x σA x WB x σB x r) Data…

Q: f a stock's variance of return is written as σ2, then its standard deviation will be written as:

A: Standard deviation and variance are the measures of risk and volatility and both are important…

Q: Given the following probability distribution, what is the standard deviation of returns for Security…

A: standard deviation of security is computed by following formula:-standard deviation of security =…

Q: For minimum variance portfolio,the weight of Asset A1 Ltd in two asset portfolio ,having correlation…

A:

Q: Given the following probability distribution, what is the standard deviation of returns for Security…

A: Mean= Σ [xi*P(xi)]Standard deviation =sqrt(Σ (xi - x̄)^2*P(xi))

Q: Return SD 0.05 0.25 0.17 0.18 0.008 A B COV A Rf this is a minimum variance question what is the…

A: Use the formula for weights in a two-asset minimum variance portfolio: [ w_A = \frac{\sigma^2_B -…

Q: What is the correlation between returns of stock S and T, given that covariance between stocks is…

A: Given, Covariance = 2.419 Standard deviation =1.23 and 2.21

Q: You are conducting some statistical analyses on two securities: Stock X and Stock Y. You find that…

A: Volatility of stock X = 5.78%Volatility of stock Y = 7.94%Correlation = 0.25To find: The covariance…

Q: Consider the following regression Pt * - Pt = .07(1.4) + .4*Pt (3.6) + et where Pt * is Shiller’s ex…

A: The efficient markets theory is a theoretical framework that explains the functioning of financial…

Q: Two securities have a covariance of 0.076. If their respective standard deviations are 13% and 22%,…

A: Correlation Co-efficient of Variance is the ratio of standard deviation of the security with the…

Q: The variance of BMI, Inc. is estimated to be 0.0158 while the variance of QBU, Inc. is estimated to…

A: The portfolio variance refers to the measure of the spread of the returns of the portfolio. It is…

Q: Consider the following probability distribution for stocks A and B: State Return on Stock A 1 10% 2…

A: Correlation is a statistical measure that is used in finance to estimate the degree to which two…

Q: The variance of X is 0.36. The standard deviation of Y is 0.38. The correlation between the two is…

A: The variance of a portfolio refers to the measure that is used to find the dispersion of the returns…

Q: The measures of risk include Geometric Mean Arithmetic Mean Median Variance

A: The risk is very important in the stock market and we must quantify the risk so that it can be…

Q: Using the data in the following table,, and the fact that the correlation of A and B is 0.81,…

A: Sure, the volatility (standard deviation) of a portfolio that is 65% invested in stock A and 35%…

Q: The correlation coefficient of two securities described in the table below is closest to: Covariance…

A: Correlation coefficient is calculated by taking a variable's covariance as the numerator and the…

Q: Calculate the expected return for Stock A.

A: Expected Return: It represents the profit or loss expected by an investor on an investment. It is…

Q: 16. There are two stocks with the following return and risk values. The correlation between A and B…

A: The expected return of a portfolio gives the weighted average return that an investor can expect…

Q: Refer to the table below: Expected return, E(R) Standard deviation, o Correlation 3 Doors, Inc. 18%…

A: Standard deviation is indicated as the variations average amount in the set of data. It is helpful…

Q: Given Portfolio 1 Expected Return= 0.15 Portfolio variance = 0.001 Standard Deviation = 0.0316…

A: A portfolio is the combination of various financial assets into one basket with the aim to earn…

Q: The resulting SML equation for Laternios is given by: Er Laternios + = X (E[rM] - rf)

A: Regression analysis on a stock provides insights into the relationship between the stock's returns…

Q: Stocks A, B and C have a monthly return and variance of: (10%, 0.0036), (15%, 0.0009) and (3%,…

A:

Q: The standard deviation of return on investment a is 0.10, while the standard deviation of return on…

A: It is a case of calculation of covariance when the data of standard deviation and correlation…

Q: Calculate the average returns, variance and standard deviation for three securities X, Y and Z that…

A: Average Return, variance and standard deviation of a security is calculated using the below formula…

Q: What is the correlation coefficient of the returns of the stock and the returns of the market?

A: Correlation: It is a measure of statistics used to show the degree of association between two…

Q: The probability distributions of expected returns for stocks XMX and BMX are as follows: Probability…

A: Let Pn = Probability of each state Xn = Return of XMX in each state Bn = Return of BMX in each state…

Q: What is the average annual return? b. What is the variance of the stock's returns? c. What is the…

A: Standard deviation refers to the measurement of the dispersion of data from its mean value which…

Q: Asset X Asset Y E(R) = 8% E(R,) - 18% E(s.) = 7% E(s,) - 25% Calculate the expected return and…

A: Hi! Thank you for the question, As per the honor code, we are allowed to answer one question at a…

Q: If two stocks have variance σ2=16 each, could their covariance be equal to σ12 = 20

A: It has been provided that the value of variance for two stocks is 16 . Thus, the standard deviation…

Q: If the correlation between two stocks is .49 and the standard deviation of both stocks are 39% and…

A: Covariance between two stocks = Correlation between stocks *Standard deviation of stock 1*Standard…

Q: Based on the information, calculate expected returns for each share, variance for each share and…

A: Here we are provided with 4 different possible outcomes/situations, the probability of each outcome…

Q: The interpretation of stock beta coefficient requires an assumption of an average stock which has a…

A: Beta is a measure of a security's systematic risk which cannot be diversified and measures the…

Q: Given the following probability distribution, what are the expected return and the standard…

A: The expected return is the return expected from the investment made. The expected return in this…

Q: The variances of stocks A and B are 1 percentage square and 4 percentage square, respectively. If…

A: Correlation coefficient is a standardized measure of co-movement between two stocks. The correlation…

Q: The variance ratio (VR) can be used to determine whether returns satisfy the efficient market…

A: The variance ratio is a statistical measure used to assess the randomness of a sequence of numbers,…

Q: Q3. Find the Expected Return, Variance, and Standard Deviation for the Stock Returns 1 and 2. Also,…

A: Expected returns is the average mean of the expected returns. It shows the approximate value that is…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.