Stock X has a standard deviation of return of 10%. Stock Y has a standard deviation of 20%. The correlation coefficient between the stocks is 0.5. If you invest 60% of your funds in stock X and 40% in stock Y. What is the standard deviation of your portfolio? (please state the formula and show your workings)
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Stock X has a standard deviation of return of 10%. Stock Y has a standard deviation of 20%. The correlation coefficient between the stocks is 0.5. If you invest 60% of your funds in stock X and 40% in stock Y. What is the standard deviation of your portfolio? (please state the formula and show your workings)
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- c) Stock 1 has a standard deviation of return of 1%. Stock 2 has a standard deviation of return of 8%. The correlation coefficient between the two stocks is 0.5. If you invest 60% of your funds in stock 1 and 40% in stock 2, what is the standard deviation of your portfolio? Please provide the details of your calculations and discuss your results.c) Stock 1 has a standard deviation of return of 1%. Stock 2 has a standard deviation of return of 8%. The correlation coefficient between the two stocks is 0.5. If you invest 60% of your funds in stock 1 and 40% in stock 2, what is the standard deviation of your portfolio? Please provide the details of your calculations and discuss your results. You decide now to combine your portfolio (discussed in question c) with another portfolio with the same standard deviation and invest equally in both portfolios. The correlation between the two portfolios is zero. d) What is the standard deviation of this new portfolio? Please provide the details of your calculations and discuss your results.c) Stock 1 has a standard deviation of return of 1%. Stock 2 has a standard deviation of return of 8%. The correlation coefficient between the two stocks is 0.5. If you invest 60% of your funds in stock 1 and 40% in stock 2, what is the standard deviation of your portfolio? Please provide the details of your calculations and discuss your results. You decide now to combine your portfolio (discussed in question c) with another portfolio with the same standard deviation and invest equally in both portfolios. The correlation between the two portfolios is zero. d) What is the standard deviation of this new portfolio? Please provide the details of your calculations and discuss your results. e) Did we achieve diversification by combining uncorrelated portfolios with identical levels of risk? Explain.
- Stock 1 has a standard deviation of return of 6%. Stock 2 has a standard deviation of return of 2%. The correlation coefficient between the two stocks is 0.5. If you invest 60% of your funds in stock 1 and 40% in stock 2, what is the standard deviation of your portfolio? Please provide the details of your calculations and discuss your results.Consider a portfolio consisting of the following three stocks: an expected return of 8%. The risk-free rate is 3%. a. Compute the beta and expected return of each stock. ▪ The volatility of the market portfolio is 10% and it has b. Using your answer from part a, calculate the expected return of the portfolio. c. What is the beta of the portfolio? d. Using your answer from part c, calculate the expected return of the portfolio and verify that it matches your answer to part b.You create a portfolio that invests 60% in stock A with E(rA) = 15%, σA = 10% and 40% in stock B with E(rB) = 10%, σB = 4%. 1. Estimate the expected return of the portfolio. 2. Estimate the standard deviation of the portfolio if the two stocks are uncorrelated. 3. Estimate the standard deviation of the portfolio if the two stocks have correlation 0.5. 4. Estimate the standard deviation of the portfolio if the two stocks are perfectly positively correlated.
- The risk-free rate is 3 percent. Also, the expected return on the market portfolio is 10.5 percent.a. Calculate the expected return of your portfolio. (Hint: The expected return of a portfolio equals the weighted average of the individual stocks" expected returns, where the weights are the percentage invested in each stock.)b. Calculate the portfolio beta.c. Given the preceding information, plot the security market line on paper. Plot the stocks from your portfolio on your graph.d. From your plot in part c, which stocks appear to be your winners, and which ones appear to be your losers?e. Why should you consider your conclusion in part d to be less than certain?The expected return and standard deviation of Stock A are 12% and 24%, respectively. The expected return and standard deviation of Stock B are 5% and 19%, respectively. The correlation between the two stocks is 0.4. The risk-free rate in the economy is 1%. A. What is the Sharpe ratio for Stock A and Stock B? Show your calculation steps briefly and clearly. B. Calculate the optimal risky portfolio P*. You do not need to show your calculation steps for this subquestion. C. Now suppose that the correlation between the two stocks is -0.2 (instead of 0.4). Re-calculate the optimal risky portfolio P* and compare it to your answer in Part B. What do you observe? You do not need to show your calculation steps for this subquestion. D. Using the results above, briefly explain why investors might still consider investing in stocks with a (relatively) low Sharpe ratio as a part of their portfolio.Consider a portfolio consisting of the following three stocks: E The volatility of the market portfolio is 10% and it has an expected return of 8%. The risk-free rate is 3%. a. Compute the beta and expected return of each stock. b. Using your answer from part (a), calculate the expected return of the portfolio. c. What is the beta of the portfolio? d. Using your answer from part (c), calculate the expected return of the portfolio and verify that it matches your answer to part (b). a. Compute the beta and expected return of each stock. (Round to two decimal places.) TITLT Data table Portfolio Weight (A) Volatility (B) Correlation (C) Expected Return (E) % Beta (D) НЕС Согр 0.28 13% 0.33 Green Widget (Click on the following icon a in order to copy its contents into a spreadsheet.) 0.39 27% 0.61 % Portfolio Weight Alive And Well 0.33 14% 0.43 Volatility 13% Correlation with the Market Portfolio НЕС Согр Green Widget 0.28 0.33 b. Using your answer from part (a), calculate the expected…
- You invest in a portfolio of 5 stocks with an equal investment in each one. The betas of the 5 stocks are as follows: 0.8, -1.3, 0.95, 1.2, and 1.4. The risk-free return is 3% and the market return is 7%. a. Compute the beta of the portfolio. b. Compute the required return of the portfolio.You have a portfolio P that consists of 50% Stock X and 50% Stock Y. Stock X has a beta of 0.7 and Stock Y has a beta of 1.3. The standard deviation of each stock's returns is 20%. The stocks' returns are independent of each other, i.e., the correlation coefficient, r, between them is zero. a. What is the beta for this portfolio? b. What is the standard deviation of this portfolio’s return? c. Describe the significance of the correlation coefficient being zero?Suppose the total risk of Portfolios A, B and C are 49% ², 64%² and 100% ² respectively. The market price of risk is 8%. The Market Portfolio (M) has an expected return and a total risk of 11% and 100% respectively. (a) You want to form another Portfolio H by investing $7,000 in Portfolio A and $3,000 in Portfolio B. Compute the standard deviation of Portfolio H if the correlation coefficient between Portfolio A and Portfolio B is: i) perfectly positively correlated ii) uncorrelated iii) perfectly negatively correlated (b) If the expected return of Portfolio C is 9.4% and it is lying on the Securities Market Line, what is the beta of Portfolio C? State the answer in %². (c) Is Portfolio C a Market Portfolio as it has same level of total risk (i.e. 100% 2) as the Market Portfolio? Why or Why not?
