Neha is an analyst at a wealth management firm. One of her clients holds a $7,500 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. 35% 0.750 0.53% Arthur Inc. 20% 1.400 0.57% Li Corp. 15% 1.300 0.60% Transfer Fuels Co. 30% 0.300 0.64%   Neha calculated the portfolio’s beta as 0.828 and the portfolio’s expected return as 8.55%. Neha thinks it will be a good idea to reallocate the funds in her client’s portfolio. She recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 4.00%, and the market risk premium is 5.50%. 1. According to Neha’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change? 0.86%   0.67%   1.07%   0.99%     2. Analysts’ estimates on expected returns from equity investments are based on several factors. These estimations also often include subjective and judgmental factors, because different analysts interpret data in different ways. Suppose, based on the earnings consensus of stock analysts, Neha expects a return of 7.68% from the portfolio with the new weights. Does he think that the revised portfolio, based on the changes he recommended, is undervalued, overvalued, or fairly valued? Fairly valued   Overvalued   Undervalued     3. Suppose instead of replacing Atteric Inc.’s stock with Transfer Fuels Co.’s stock, Neha considers replacing Atteric Inc.’s stock with the equal dollar allocation to shares of Company X’s stock that has a higher beta than Atteric Inc.. If everything else remains constant, the required return from the portfolio would    .

quiz 8-20

The following table lists stock price data for four companies held in a mutual fund's portfolio: 52 WEEK HI LO +11.5 29.79 25.00 +15.9 55.55 40.04 +17.8 40.20 30.03 +6.9 38.60 23.17 YTD % CHG STOCK Habib Corp. Marston Tech Chemla Inc. Vistou Co. YLD DIV % 1.50 5.3 2.00 4.9 1.20 3.2 0.50 1.4 Use the preceding data to answer the following question: VOL P/E 100s CLOSE 4001 28.47 5 34201 41.10 -0.15 17 2033 37.67 +0.17 15 15770 34.87 -0.28 NET CHG +0.08 Which of the stocks in the table had the highest earnings per share (EPS) in the past year?

Richard owns the following portfolio of securities. What is the beta for the portfolio?CompanyBetaPercent of PortfolioApple2.5015%Wells Fargo0.6550%Ebay1.7035%

8. Portfolio risk and return Ariel holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock's beta, is listed in the following table: Stock Andalusian Limited (AL) Zaxatti Enterprises (ZE) Three Waters Co. (TWC) Flitcom Corp. (FC) Suppose all stocks in Ariel's portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? O Flitcom Corp. O Three Waters Co. O Andalusian Limited O Zaxatti Enterprises O Zaxatti Enterprises O Three Waters Co. O Andalusian Limited O Flitcom Corp. Investment Beta Standard Deviation $3,500 1.00 $2,000 1.30 $1,500 1.20 $3,000 0.30 Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk? Ariel's portfolio 9.00% 12.00% 20.00% 19.50% If the risk-free rate is 4% and the market risk premium is 5.5%, what is Ariel's portfolio's beta and required return? Fill in the following table: Beta Required…

Rachel is a financial investor who actively buys and sells in the securities market. Now she has aportfolio of all blue chips, including: $13,500 of Share A, $7,600 of Share B, $14,700 of Share C, and$5,500 of Share D.Required:a) Compute the weights of the assets in Rachel’s portfolio? (2 marks)b) If Rachel’s portfolio has provided her with returns of 9.7%, 12.4%, -5.5% and 17.2% over the pastfour years, respectively. Calculate the geometric average return of the portfolio for this period. (2marks)c) Assume that expected return of the stock A in Rachel’s portfolio is 13.6% this year. The riskpremium on the stocks of the same industry are 4.8%, betas of these stocks is 1.5 and the inflationrate was 2.7%. Calculate the risk-free rate of return using Capital Market Asset Pricing Model(CAPM). (2 marks)d) Following is forecast for economic situation and Rachel’s portfolio returns next year, calculate theexpected return, variance and standard deviation of the portfolio. (4 marks)State of…

As an assistant manager of an equity mutual fund, you are asked to write a report analysing shares and share performances. As part of your analysis you have collected the following annual returns for share A and share B over the past five years A B 2014 2.50% 3.20% 2015 3.40% -1.25% 2016 -1.50% -4.25% 2017 4.50% 2.20% 2018 1.10% 6.50% Q1) Calculate the expected return and standard deviation of shares A and B during the 5-year period Q2) Calculate the covariance and correlation between the returns on shares A and B during the 5-year period Q3) Calculate the return and standard deviation of the portfolio that consists of 65% in asset A and 35% in asset B during the 5-year period Q4) Calculate the Sharpe ratio of the portfolio assuming that the risk-free rate is expected to remain at 0.5% per annum. What info does the Sharpe ratio give to an investor?