Suppose Johnson & Johnson and the Walgreen Company have the expected returns and volatilities shown below, with a correlation of 21.4%. E [R] SD [R] Johnson & Johnson 6.8% 15.2% Walgreen Company 10.5% 19.8% For a portfolio that is equally invested in Johnson & Johnson's and Walgreen's stock, calculate: a. The expected return. b. The volatility (standard deviation). a. The expected return. The expected return of the portfolio is %. (Round to one decimal place.) b. The volatility (standard deviation). The volatility of the portfolio is %. (Round to one decimal place.)

Suppose Johnson & Johnson and the Walgreen Company have the expected returns and volatilities shown below, with a correlation of 21.4%. E [R] SD [R] Johnson & Johnson 6.8% 15.2% Walgreen Company 10.5% 19.8% For a portfolio that is equally invested in Johnson & Johnson's and Walgreen's stock, calculate: a. The expected return. b. The volatility (standard deviation). a. The expected return. The expected return of the portfolio is %. (Round to one decimal place.) b. The volatility (standard deviation). The volatility of the portfolio is %. (Round to one decimal place.)

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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Suppose Johnson & Johnson and the Walgreen Company have the expected returns and volatilities shown below, with a correlation of 22.8%. E [R] 7.2% SD [R] 16.4% 10.3% 19.5% Johnson & Johnson Walgreen Company For a portfolio that is equally invested in Johnson & Johnson's and Walgreen's stock, calculate: a. The expected return. b. The volatility (standard deviation). a. The expected return. The expected return of the portfolio is%. (Round to one decimal place.) b. The volatility (standard deviation). The volatility of the portfolio is%. (Round to one decimal place.)
Suppose Johnson & Johnson and the Walgreen Company have the expected returns and volatilities shown below, with a correlation of 22.7%. Johnson & Johnson Walgreen Company E [R] 6.1% 10.8% SD [R] 16.5% 19.1% For a portfolio that is equally invested in Johnson & Johnson's and Walgreen's stock, calculate: a. The expected return. b. The volatility (standard deviation). a. The expected return. The expected return of the portfolio is%. (Round to one decimal place.) b. The volatility (standard deviation). The volatility of the portfolio is%. (Round to one decimal place.)
Suppose Johnson & Johnson and the Walgreen Company have the expected returns and volatilities shown below, with a correlation of 22.4%. Johnson & Johnson Walgreen Company E [R] 6.5% 10.7% SD [R] 15.5% 19.9% For a portfolio that is equally invested in Johnson & Johnson's and Walgreen's stock, calculate: a. The expected return. b. The volatility (standard deviation). a. The expected return. The expected return of the portfolio is %. (Round to one decimal place.)
Suppose Johnson & Johnson and the Walgreen Company have the expected returns and volatilities shown below, with a correlation of 22.2%. Johnson & Johnson Walgreen Company E [R] 7.2% 9.3% SD [R] 16.8% 20.4% For a portfolio that is equally invested in Johnson & Johnson's and Walgreen's stock, calculate: a. The expected return. b. The volatility (standard deviation). a. The expected return. The expected return of the portfolio is ☐ %. (Round to one decimal place.) b. The volatility (standard deviation). The volatility of the portfolio is %. (Round to one decimal place.)
Using the equity asset valuation model (CAPM) equation, determine the required return for the shares of the following companies, if the market return is 7.50% (Rm = 7.50%) and the risk-free asset return is 1.25% (RF = 1.25%). You must show all counts. Stock Beta SKT 0.65 COST 0.90 SU 1.42 AMZN 1.57 V 0.94
(c) Consider information given in the table below and answers the question asked thereafter: iv. Calculate covariance and coefficient of correlation between the returns of the stocks A and B.v. Now suppose you have $100,000 to invest and you want to a hold a portfolio comprising of $35,000 invested in stock A and remaining amount in stock B. Calculate risk and return of your portfolio. (d) Firm A reports a Profit Margin of 6.5% and a Total Asset Turnover Ratio of 3.25. Their total asset level is $8,500,000. Assume there are 700,000 shares outstanding and the PE ratio is 11. Also, assume the Return on Equity is 16%. Based on this, calculate the MV/BV ratio.
a. Based on the following information, calculate the expected return and standard deviation for each of the following stocks. What are the covariance and correlation between the returns of the two stocks? Calculate the portfolio return and portfolio standard deviation if you invest equally in each asset. Returns State of Economy Prob K Recession 0.25 -0.02 0.034 Normal 0.6 0.138 0.062 Boom 0.15 0.218 0.092 b. A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7 percent and a standard deviation of 10 percent. The risk-free rate is 4 percent, and the expected return on the market portfolio is 12 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a .45 correlation with the market portfolio and a standard deviation of 55 percent? c. Suppose the risk-free rate is 4.2 percent and the market portfolio has an expected return of 10.9 percent. The market portfolio has a variance of…
a. Determine Stock X's beta coefficient. b. Determine the arithmetic average rates of return for Stock X and the NYSE over the period given. Calculate the standard deviations of returns for both Stock X and the NYSE. c. Assume that the required return on equity, re, for Stock X is equal to its average return. Likewise, assume that the market return is equal to the NYSE's average return. Using the information calculated, what is the assumed risk-free rate in the CAPM equation? Hint: Solve algebraically for rf in, re = r¡ + B(rm – r;)
Assume that the risk-free rate of return is 4% and the market risk premium (i.e., Rm - R;) is 8%. If use the Capital Asset Pricing Model (CAPM) to estimate the expected rate of return on a stock with a beta of 1.28, then this stock's expected return should be A) 10.53% B) 14.24% 23.15% 6.59%
(Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Common Stock B Probability Return Probability Return0.20 10% 0.15 -4% 0.60 16% 0.35 7%0.20 21% 0.35 13% 0.15 20% a) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, what is the expected rate of return for stock A? What is the standard deviation? b. Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, what is the expected rate of return for stock B? What is the standard deviation? c. Based on the risk (as measured by the standard deviation) and return of each stock, which…
For an investment in a stock, the probability of the return being -10.0% is 0.3, 10.0% is 0.4, and 30.0% is 0.3. Given the probability distributions, what is the expected rate of return for the investment?Choices:A. 10.00%B. 9.50%C. 15.00%D. 12.50%E. 13.00%
(Expected Rate of Return and Risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on risk (as measured by the standard deviation) and return? Common Stock A Common Stock B Probability Return Probability Return .30 11% .20 25% .40 15% .30 6% .30 19% .30 14% .20 22%

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