Problem 13-9 Returns and Variances (LO1, 2)Consider the following information:State ofEconomyProbability ofState of Economy0.620.38BoomBustVarianceRate of Return if State Occurs.Stock BStock C0.170.350.06-0.10a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations.Round the final answer to 2 decimal places.)Expected returnb. What is the variance of a portfolio invested 20% each in A and B and 60% in C? (Do not round intermediate calculations. Roundthe final answer to 6 decimal places.)%Stock A0.090.20

Problem 13-9 Returns and Variances (LO1, 2) Consider the following information: State of Economy Probability of State of Economy 0.62 0.38 Boom Bust Rate of Return if State Occurs Stock B 0.17 0.06 Stock A 0.09 0.20 Stock C 0.35 -0.10 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do n Round the final answer to 2 decimal places.) Expected return % b. What is the variance of a portfolio invested 20% each in A and B and 60% in C? (Do not r the final answer to 6 decimal places.)

Problem 13-9 Returns and Variances (LO1, 2) Consider the following information: State of Economy Probability of State of Economy 0.62 0.38 Boom Bust Rate of Return if State Occurs Stock B 0.17 0.06 Stock A 0.09 0.20 Stock C 0.35 -0.10 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do n Round the final answer to 2 decimal places.) Expected return % b. What is the variance of a portfolio invested 20% each in A and B and 60% in C? (Do not r the final answer to 6 decimal places.)

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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Consider the rate of return of stocks ABC and XYZ. Year 1 2 3 4 ABC XYZ ABC 22% 9 19 1 O ABC Ⓒ XYZ ABC XYZ Required: a. Calculate the arithmetic average return on these stocks over the sample period. (Do not round Intermediate calculations. Round your answers to 2 decimal places.) XYZ 38% 11 19 -11 Arithmetic Average b. Which stock has greater dispersion around the mean return? c. Calculate the geometric average returns of each stock. (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Expected rate of return 11.40 % 11.40 % Geometric Average Expected rate of return d. If you were equally likely to earn a return of 22%, 9%, 19%, 6%, or 1%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) e. What if the five possible outcomes were those of stock XYZ? (Do not round Intermediate calculations. Round your answers to 2…
Consider the following information: State of Probability of Economy State of Economy 15 45 30 .10 Stock A Stock B Boom 32 42 Good 19 13 Poor -.05 -08 Bust -16 -,28 -09 Your portfolio is invested 30 percent each in A and C, and 40 percent in B. What is the standard deviation of this portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Do not include a percent sign with your answer.) Numeric Response **** Rate of Return if State Occurs wwwww Stock C 33 12 -.06
Consider the following information: Probability of State of State of Economy Boom Bust Economy 0.55 8.45 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate Round the final answer to 2 decimal places.) Expected return Variance Rate of Return if State Occurs Stock A Stock B Stock C 0.06 0.14 0.34 0.10 0.02 -0.07 10.65% b. What is the variance of a portfolio invested 25% each in A and B and 50% in C? (Do not round intermediate calc the final answer to 6 decimal places.)
Consider the following information: Rate of Return if State Occurs State of Probability of State of Economy Stock A Stock B Stock C Economy Boom 0.15 0.32 0.42 0.33 Good 0.45 0.19 0.13 0.12 Poor 0.30 -0.05 -0.08 -0.06 Bust 0.10 - 0.16 -0.28 0.09 a. Your portfolio is invested 30 percent each in A and C, and 40 percent in B. What is the expected return of the portfolio? (Round your answer to 2 decimal places. (e.g., 32.16)) Expected return % b-1What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places. (e.g., 32.16161)) Variance b-2What is the standard deviation? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Standard deviation %
20) please answwer the question correctly
Q6-Suppose that the rate of return on investment- free has risk %8 and the expected return rate for the market %14. If the particular stock his given B = 0.60 - What is the expected return rate based on CAPM? -How much the Beta of another stock that has required return 0.20 ?
2
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What are the expected returns for stock A and stock B? State Probability Return on A Return on B Boom .60 0.35 0.10 Bust .40 0.05 0.25 a. 15.50%, 10.83% b. 26.00%, 14.50% c. 23.00%, 16.00% d. 21.50%, 16.75%
Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock C Boom .14 Bust .16 a. b. Stock B .58 .42 .22.40 .06-.05 What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the variance of a portfolio invested 22 percent each in A and B and 56 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.)
Consider the following information: Probability of State of State of Economy Book Bust Economy 0.55 Variance Rate of Return if State Occurs Stock A Stock B 0.06 0.14 0.10 0.02 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediat Round the final answer to 2 decimal places.) Expected return b. What is the variance of a portfolio invested 25% each in A and B and 50% in C? (Do not round intermediate calc the final answer to 6 decimal places.) 10.65% Stock C 0.34 -0.07

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