onsider the historical return data of ABC portfolio as below. 1990 4% 1991 10% 1992 2% 1993 1% 1994 5% 1995 -1% 1996 7% 1997 -3% 1998 0% 1999 3% What is the sample (empirical) probability that return is greater than or equal to 4%? Why?

onsider the historical return data of ABC portfolio as below. 1990 4% 1991 10% 1992 2% 1993 1% 1994 5% 1995 -1% 1996 7% 1997 -3% 1998 0% 1999 3% What is the sample (empirical) probability that return is greater than or equal to 4%? Why?

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter6: Risk And Return

Section: Chapter Questions

Problem 7MC: Explain correlation to your client. Calculate the estimated correlation between Blandy and...

See similar textbooks

Related questions

Q: Historical nominal returns for Coca-Cola have been 8% and -20%. The nominal returns for the market…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: (a) What is meant by the term correlation? What is meant by the term diversification? (b) Suppose…

A: Corrleation for second part is 0.96 To Find: Expected return Standard deviation

Q: what is the Sharpe ratio of this portfolio?

A: Information Provided: Return = 25.30% Standard deviation = 31% T-bills = 5%

Q: 3. Consider three stocks A, B and C and a market index M with the following prices: Year то T1 T2…

A: Note: This question has several sub-parts. The first three have been answered below

Q: Consider the following information: Probability of State of Economy 0.54 0.46 State of Rate of…

A: Expected return refers to the anticipated amount of profit or loss that an investor calculates from…

Q: Stocks A and B have the following historical returns: Year Stock A’s Returns Stock B’s Returns…

A: Sharpe ratio is a tool which measures the performance of security or portfolio in terms of risk free…

Q: The return, standard deviation, market risk premium and Beta (β) of A, B, C, D and the Market…

A: The performance of the portfolios can be measured using Sharpe ratio, Treynor ratio and Jensen's…

Q: A portfolio returned 11% last year, 2% better than the market return of 9%. the portfolio’s return…

A: Sharpe ratio = (Mean portfolio return − Risk-free rate)/Standard deviation of portfolio return

Q: I. 1. Consider stocks A and B with the following past returns: Month 1 A 3 4 4% 6% 8% | 2% в 10% 8%…

A: Weight of A is 30% Weight of B is 70% To Find: Contribution of Stock B in standard deviation of…

Q: C). Your investment in A Limited earned the following returns for the years 1996 to 1999: 30%, 40%,…

A: Year Return 1996 30% 1997 40% 1998 15% 1999 7%

Q: An analyst wants to evaluate Portfolio X, consisting entirely of U.S. common stocks, using both the…

A: The Treynor measure (T) relates the rate of return earned above the risk‑free rate to the…

Q: local Philippine equities have the same risk (standard deviation) and return expectations: 10 %…

A: Here, Here, Expected Return of Equities is 10% Standard Deviation of Equities is 20% Weight of each…

Q: Consider the following bootstrapped 3-year performance of an actively managed investor's portfolio…

A: Tracking error means identifying the difference between the actual and benchmark position of the…

Q: Asset 1 Asset 2 Expected return 0.07 0.078 Standard deviation 0.1 0.2 if correlation is 0.4 weight 1…

A: In order to determine the risk and performance of the portfolio investors uses measures such as…

Q: Consider the following information: Rate of Return If State Ocurs State of Probability of State of…

A: Introduction: The expected return of stock refers to the return that is anticipated on a stock. A…

Q: Expected return for the market, 12%; Standard deviation of market return, 21%; Risk-free rate, 8%;…

A: Formula to calculate Beta of stock is Beta = Correlation coefficient between Stock and the market*…

Q: In a perfect world where asset return is normally distributed. We have risk and return…

A: Here, Assets ABC DEF Market portfolio Expected Return 10% 15% 5% Standard Deviation 20% 40%…

Q: Need help on all

A: Hi there, Thanks for posting the question. As per Q&A Guidelines, we should answer the first…

Q: Percentages need to be entered in decimal format, for instance 3% would be entered as .03. That is…

A: Note: Return of the stock is taken what was provided in the previous question. Please adjust the…

Q: assume that expected return of the stock A in Rachel's portfolio is 13.6% this year.The risk premium…

Q: Assume that the following data available for the portfolio, calculate the expected return,variance…

A: Diversified portfolio- It refers to a portfolio of investments in which unsystematic risk or firm…

Q: Return if State Occurs Stock C State of Economy Probability of State of Economy Stock B Boom 5% 20%…

Q: (Expected Rate of Return and Risk) Syntex, Inc. is considering an investment in one of two common…

A: Coefficient of Variation =Standard deviation/ Mean

Q: An analyst wants to evaluate Portfolio X, consisting entirely of U.S. common stocks, using both the…

A: Treynor ratio = (Average return - Risk free rate)/Beta Sharpe ratio = (Average return - Risk free…

Q: Consider the following information: State of Rate of Return if State Occurs Probability of State of…

A: The expected return on the portfolio indicates the returns on investment of investors. It's…

Q: Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common…

A: Expected return is sum of weighted possible returns of a stock where weights are probability…

Q: State of Economy Probability ABC Company Expected Return Expected Return XYZ Company Very Poor 0.30…

A: Solution : Co-Variance is calculated as follows. Co-Variance : Dx * Dy / N…

Q: Refer the table below on the average excess return of the U.S. equity market and the standard…

A: The question is based on the concept of portfolio theory and management. The portfolio is a…

Q: Consider the following information on Stocks A, B, C and their returns (in decimals) in each state:…

A: Expected return of portfolio:

Q: nsider the historical return data of ABC portfolio as below. 1990 4% 1991 10% 1992 2% 1993 1% 1994…

A: average return =sum of returntotal number of return

Q: Determine which of A or B is over-valued or undervalued.

A: Stock value (Intrinsic value): It is the true estimated value of a stock and if the intrinsic value…

Q: Consider a position consisting of a K200,000 investment in Asset A and a K300,000 investment in…

A: Value at Risk (VaR) gives the potential and probability of loss in a portfolio, firm, or position…

Q: Correlation and Beta You have been provided the following data about the securities of three firms,…

A: Risk free rate (Rf) = 0.05 Market return (Rm) = 0.12 Market standard deviation (Sm) = 0.20

Q: Here are some historical data on the risk characteristics of Ford and Harley Davidson. Ford…

Q: During the year just ended, Anna Schultz's portfolio, which has a beta of 0.97, earned a return of…

A: Treynor's Ratio = (Average rate of portfolio-risk free rate)/Beta of the portfolio

Q: You have observed the following returns over time: year Stock X % Stock Y % Market % 2006 14 13 12…

A: "Since you have posted a question with multiple sub-parts, we have solved the first three for you.…

Q: Assume the risk-free rate is r = 3%. Consider the data below: Stock(stock 1, stock 2) Expected…

A: Weight of stock 1 (W1) =σ22-ρ12σ1σ2σ21+σ22-2ρ12σ1σ2=(30)2-0×40×30(30)2+(40)2-2×0×40×30=9002500=0.36…

Q: Assume that the following data available for the portfolio, calculate the expected return, variance…

A: Portfolio Expected Return = (wa ×Ra) + (wb ×Rb) Wa= weight of security a Wb= weight of security b Ra…

Q: onsider the case of two financial assets and three market conditions (states). The table below gives…

A: Expected rate of the portfolio depends on the weight of stocks in portfolio and return on stocks of…

Q: Consider the following bootstrapped 3-year performance of an actively managed investor's portfolio…

A: Tracking error means identifying the difference between the actual and benchmark position of the…

Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

Question

onsider the historical return data of ABC portfolio as below.
1990 4%

1991 10%

1992 2%

1993 1%

1994 5%

1995 -1%

1996 7%

1997 -3%

1998 0%

1999 3%

What is the sample (empirical) probability that return is greater than or equal to 4%? Why?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Dependent Variable: PORTFOLIO Method: Least Squares Sample: 1991M01 2009M12 Included observations: 228 Variable с MARKET SIZE VALUE MOMENTUM R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Coefficient Std. Error t-Statistic 0.003080 0.002256 1.364876 0.0037 0.580669 0.054438 10.66651 0.0000 0.752523 0.057275 13.13866 0.0000 0.054039 0.059387 0.909954 0.3638 0.056782 1.044482 0.2974 0.595842 0.032935 Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Prob. 457.2243 Hannan-Quinn criter. 82.19105 Durbin-Watson stat 0.000000 0.007051 0.051348 -3.966880 -3.891675 -3.936537 1.693594 1) Is the model statically significant? Make sure to justify your answer. Write down the model equation (5 marks)
What is the correlation coefficient between returns on any efficient portfolio and returns on the market portfolio in CAPM? 0.5 -0.5 -1 1 O
Which of the following measures reflects the excess return earned on a portfolio per unit of its systematic risk a. Treynor’s measure b. Sharpe’s measure c. Jensen’s measure d. Total measure
onsider the historical return data of ABC portfolio as below. 1990 4% 1991 10% 1992 2% 1993 1% 1994 5% 1995 -1% 1996 7% 1997 -3% 1998 0% 1999 3% What is the average return given that the return is greater than or equal to 4%?
Consider the following performance data for a portfolio manager: Benchmark Portfolio Index Portfolio Weight Weight Return Return Stocks 0.65 0.7 0.11 0.12 Bonds 0.3 0.25 0.07 0.08 Cash 0.05 0.05 0.03 0.025 a.Calculate the percentage return that can be attributed to the asset allocation decision. b.Calculate the percentage return that can be attributed to the security selection decision.
Explain correlation to your client. Calculate the estimated correlation between Blandy and Gourmange. Does this explain why the portfolio standard deviation was less than Blandys standard deviation?
d. Interpret your results in (c) above, assuming that the historical average return of 8.5% from the stock is a good benchmark. e. Critically evaluate the strengths and weaknesses of applying the implied rate of return from the RIVM as a proxy of the expected return.
Supposing the return from an investment has the following probability distribution Return Probability R (%) 8 0.2 10 0.2 12 0.5 14 0.1 Required: What is the expected return of the investment? What is the risk as measured by the standard deviation of expected returns?
If you plot the relationship between portfolio expected return and portfolio beta, what is the slope of the line that results? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) | Slope of the line %
Consider the following information for four portfolios, the market, and the risk-free rate (RFR): Portfolio Return Beta SD A1 0.15 1.25 0.182 A2 0.1 0.9 0.223 A3 0.12 1.1 0.138 A4 0.08 0.8 0.125 Market 0.11 1 0.2 RFR 0.03 0 0 Refer to Exhibit 18.6. Calculate the Jensen alpha Measure for each portfolio. a. A1 = 0.014, A2 = -0.002, A3 = 0.002, A4 = -0.02 b. A1 = 0.002, A2 = -0.02, A3 = 0.002, A4 = -0.014 c. A1 = 0.02, A2 = -0.002, A3 = 0.002, A4 = -0.014 d. A1 = 0.03, A2 = -0.002, A3 = 0.02, A4 = -0.14 e. A1 = 0.02, A2 = -0.002, A3 = 0.02, A4 = -0.14
What is a risk measure? a Alpha b Required return on the market portfolio c Standard deviation of historical returns
What are the (a) expected return, (b) standard deviation, and (c) coefficient of variation for an investment with the following probability distribution? Probability Payoff 0.2 19.0% 0.7 9.0 0.1 4.0