Jamie Wong is thinking of building an investment portfolio containing two stocks, L and M. Stock L will represent 40% ofthe dollar value of the portfolio, and stock M will account for the other 60%. The historical returns over the next 6 years,2013-2018for each of these stocks are shown in the following table:2013 16% 22%2014 17% 21%2015 19% 20%2016 21% 19%2017 22% 18%2018 23% 17%a. Calculate the actual portfolio return,r Subscript pfor each of the 6 years.b. Calculate the expected value of portfolio returns,r overbar Subscript p"over the 6-year period.C.Calculate the standard deviation of expected portfolio returns,sigma Subscript r Sub Subscript p"over the 6-year period.d.How would you characterize the correlation of returns of the two stocks L and M?e. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio.

Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Jamie Wong is thinking of building an investment portfolio containing two stocks, L and M. Stock L will represent 40% of the dollar value of the portfolio, and stock M will account for the other 60%. The historical returns over the next 6 years, 2013-2018 for each of these stocks are shown in the following table: 2013 16% 22% 2014 17% 21% 2015 19% 20% 2016 21% 19% 2017 22% 18% 2018 23% 17% a. Calculate the actual portfolio return, Subscript p

Jamie Wong is thinking of building an investment portfolio containing two stocks, L and M. Stock L will represent 40% of the dollar value of the portfolio, and stock M will account for the other 60%. The historical returns over the next 6 years, 2013-2018 for each of these stocks are shown in the following table: 2013 16% 22% 2014 17% 21% 2015 19% 20% 2016 21% 19% 2017 22% 18% 2018 23% 17% a. Calculate the actual portfolio return, Subscript p

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

See similar textbooks

Similar questions

Jamie Wong is thinking of building an investment portfolio containing two stocks, L and M. Stock L will represent 50% of the dollar value of the portfolio, and stock M will account for the other 50%. The historical returns over the next 6 years, 2013−2018,for each of these stocks are shown in the following table: (see attached table) a. Calculate the actual portfolio return, rp, for each of the 6 years. b. Calculate the expected value of portfolio returns, rp, over the 6-year period. c. Calculate the standard deviation of expected portfolio returns, σrp, over the 6-year period.
Jamie Wong is thinking of building an investment portfolio containing two stocks, L and M. Stock L will represent 40% of the dollar value of the portfolio, and stock M will account for the other 60%. The historical returns over the last 6 years, 2013–2018, for each of these stocks are shown in the following table. Expected return. Year Stock L Stock M 2013 14 20 2014 14 18 2015 16 16 2016 17 14 2017 17 12 2018 19 10 A. Calculate the actual portfolio return,, for each of the 6 years. B. Calculate the average return for each stock and for the portfolio over the 6-year period. C. Calculate the standard deviation of returns for each asset and for the portfolio. How does the portfolio standard deviation compare to the standard deviations of the individual assets? D. How would you characterize the correlation of returns of the two stocks L and M? E. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio.
Jamie Wong is thinking of building an investment portfolio containing two stocks, L and M. Stock L will represent 50% of the dollar value of the portfolio, and stock M will account for the other 50%. The historical returns over the next 6 years, 2013−2018,for each of these stocks are shown in the following table: (see attached table) d. How would you characterize the correlation of returns of the two stocks L and M? e. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio.
Jamie Wong is thinking of building an investment portfolio containing two stocks, L and M. Stock L will represent 20%of the dollar value of the portfolio, and stock M will account for the other 80%. The historical returns over the next 6 years, 2013−2018, for each of these stocks are shown in the following table: ( see attached table a. Calculate the actual portfolio return, rp, for each of the 6 years. b. Calculate the expected value of portfolio returns, rp, over the 6-year period. c. Calculate the standard deviation of expected portfolio returns, σrp, over the 6-year period. d. How would you characterize the correlation of returns of the two stocks L and M? e. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio.
4. Jamie Wong is thinking of building an investment portfolio containing two stocks, L and M. Stock L will represent 44% of the dollar value of the portfolio, and stock M will account for the other 56%. The historical returns over the last 6 years, 2013-2018, for each of these stocks are shown in the following table 4. a. Calculate the actual portfolio return, r,, for each of the 6 years. b. Calculate the average return for each stock and for the portfolio over the 6-year period. c. Calculate the standard deviation of returns for each asset and for the portfolio. How does the portfolio standard deviation compare to the standard deviations of the individual assets? d. How would you characterize the correlation of returns of the two stocks L and M? e. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio. Review Only Click on the icon to see the Worked Solution. a. The average portfolio return for 2013 is %. (Enter as a percentage and round to one…
Q3. Jamie Wong is considering building an investment portfolio containing two stocks, L and M. Stock L will represent 40% of the dollar value of the portfolio, and stock M will account for the other 60%. The expected returns over the next 6 years, 2013-2018, for each of these stocks are shown in the following table. Expected return Year Stock L Stock M 2013 14% 20% 2014 14 18 2015 16 16 2016 17 14 2017 17 12 2018 19 10 a. Calculate the expected portfolio return, rp, for each of the 6 years. b. Calculate the expected value of portfolio returns, , over the 6-year period. c. Calculate the standard deviation of expected portfolio returns, over the 6-year period. d. How would you characterize the correlation of returns of the two stocks L and M? e. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio.
Suppose you have portfolio of four stocks Stock A, B, C and D, Total investment in these stocks is equal to 2019331015 $, Beta of these stocks is 1.5, (0.5), 1.25, and 0.75 and proportion invested is 22%, 20%, 30%, and remaining in D. If the Risk free rate is 6% and market rate of return is 15%. Calculate a) Investment in each stock. b) Market premium c) Required Rate of return for each stock. d) Required rate of return of Portfolio. e) If expected rate of return of stock A is 10%, what do you think if it is overvalued or undervalued.
James had an equity portfolio that contains $40,000 investment in Tesla (TSLA) and $60,000 investment in Microsoft (MSFT) since 2018. After seeing the stock market turmoil sparked by coronavirus, he contacted you and seek for some approaches to measure the expected losses of his portfolio. As his investment adviser, you decided to use the model building approach to measure the risk of James’ portfolio. What is the 10-day 97% value at risk for the portfolio?
Imagine you wish to estimate the betas for two investments, A and B. You have gathered the following return data for the market and for each of the investments over the past 10 years, 2010-2019 2019 Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 12% Market returns 2% 13% -7% 1% 9% 10% 21% -10% 4% 10% Stock A returns 5% 10% -2% 0% 5% 12% 15% -9% 1% 15% Stock B returns 7% 9% 3% -2% 11% 9% 10% -11% 2% a. On a set of market return (x-axis)-investment return (y-axis) axes, use the data to draw the characteristic lines for investments A and B on the same graph. b. Use the characteristic lines from part a to estimate the betas for investments A and B. c. Use the betas found in part b to comment on the relative risks of investments A and B
James had an equity portfolio that contains $40,000 investment in Tesla (TSLA) and $60,000 investment in Microsoft (MSFT) since 2018. After seeing the stock market turmoil sparked by coronavirus, he contacted you and seek for some approaches to measure the expected losses of his portfolio. As his investment adviser, you decided to use the model building approach to measure the risk of James’ portfolio. What is the 10-day 97% value at risk for TSLA and MSFT, respectively?
You hold an equally-weighted Year 2018 2019 2020 (half invested in each) portfolio consisting of two stocks A and B, whose returns for the past three years are given below. Stock A Stock B 28% -14% -8% 22% 12% 2% What are the average return and standard deviation of your portfolio AB? Average return is Round your answer to a whole number, e.g., xor xx. (Hint: Think of portfolio return each year) %, standard deviation is
a) Assume that you bought 200 stock B in your portfolio for total investment of $1200, now the market price of the stock is $75, the dividend paid for this stock is $2 each year. How much is the capital gain of this stock? b) Assume that the following data available for the portfolio, calculate the expected return, variance and standard deviation of the portfolio given stock A accounts for 45% and stock B accounts for 55% of your portfolio? A B Expected return 12.50% 18.50% Standard Deviation of return 15% 20% Correlation of coefficient (p) 0.4

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS