two stocks, A and B, are perfectly correlated. Stock A has an expected return of 0.15 and a volatility of 0.25. stock B has an expected return of 0.20 and a volatility of 0.30. what is the expected return volatility of the portfolio consisting of 45% of stock A and 55% of stock B?
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two stocks, A and B, are perfectly correlated. Stock A has an expected return of 0.15 and a volatility of 0.25. stock B has an expected return of 0.20 and a volatility of 0.30. what is the expected return volatility of the portfolio consisting of 45% of stock A and 55% of stock B?
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- Stocks A and B have the following returns: Stock A Stock B 1 0.09 0.06 0.05 0.02 3 0.13 0.05 4 - 0.01 0.02 5 0.08 - 0.03 a. What are the expected returns of the two stocks? b. What are the standard deviations of the returns of the two stocks? c. If their correlation is 0.48, what is the expected return and standard deviation of a portfolio of 52% stock A and 48% stock B? a. What are the expected returns of the two stocks The expected return for stock A is 1. (Round to three decimal places.) The expected return for stock B is 1. (Round to three decimal places.) b. What are the standard deviations of the returns of the two stocks? The standard deviation of the return for stock A is 1. (Round to four decimal places.) The standard deviation of the return for stock B is 1. (Round to four decimal places.) c. If their correlation is 0.48, what is the expected return and standard deviation of a portfolio of 52% stock A and 48% stock B? The expected return for the portfolio is 1. (Round to four…The covariance between stocks A and B is 0.0014, the standard deviation of stock A is 0.032, and the standard deviation of stock B is 0.044. Which of the following is the most appropriate to depict the risk-return characteristics of a portfolio consisting of only stocks A and B, and explain why?If a given stock in the portfolio had established 1.23 beta; the related expected return is at 11.7percent, and 3.5percent is the current earning of a risk-free asset; a. Determine the expected return on a portfolio that is equally invested in the two assets? b. If a portfolio of the two assets has a beta of 0.7, what are the portfolio weights? c. If a portfolio of the two assets has an expected return of 9%, what is its beta? d. If a portfolio of the two assets has a beta of 2.46, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Discuss.
- A portfolio is comprised of equal weights of two stocks labeled Stock X and Stock Y. The covariance between Stock X and Stock Y is 0.10. The standard deviation of Stock X is 0.50, and the standard deviation of Stock Y is 0.50. Which of the following comes closest to the correlation coefficient between Stock X and Stock Y? Select one: a. 0.60 b. 0.50 c. 1.00 d. 0.00 e. 0.40Portfolio P has equal amounts invested in each of the three stocks, A, B, and C. Stock A has a beta of 0.8, Stock B has a beta of 1.0, and Stock C has a beta of 1.2. Each of the stocks has a standard deviation of 25%. The returns on the three stocks are independent of one another (i.e., the correlation coefficients all equal zero). Assume that there is an increase in the market risk premium, but the risk-free rate remains unchanged. Which of the following statements is CORRECT? a. The required return on Stock A will increase by less than the increase in the market risk premium, while the required return on Stock C will increase by more than the increase in the market risk premium. b. The required return on the average stock will remain unchanged, but the returns of riskier stocks (such as Stock C) will increase while the returns of safer stocks (such as Stock A) will decrease. c. The required returns on all three stocks will increase by the amount of the increase in the market…A stock has a beta of 1.14 and an expected return of 10.5 percent. A risk-free asset currently earns 2.4 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? b. If a portfolio of the two assets has a beta of .92, what are the portfolio weights? c. If a portfolio of the two assets has an expected return of 9 percent, what is its beta? d. If a portfolio of the two assets has a beta of 2.28, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain.
- A stock has a beta of 1.2 and an expected return of 11.8 percent. A risk-free asset currently earns 3.8 percent. If a portfolio of the two assets has a beta of 2.4, what are the portfolio weights? Weight of risk-free?A stock has a beta of 1.38 and an expected return of 13.6 percent. If the risk-free rate is 4.7 percent, 1)what is the expected return on a portfolio that is equally invested in the two assets? 2. if a portfolio of the assets has a beta of 0.98, what are the portfolio weights? 3. if a portfolio of the two assets has an expected return of 12.8 percent, what is its beta? 4. If a portfolio of the two assets has a beta of 2.58, what are the portfolio weights?Assume that the CAPM holds. One stock has an expected return of 8% and a beta of 0.3. Another stock has an expected return of 14% and a beta of 1.5. What is the return-to-risk ratio that CAPM assumes equal across all individual stocks?
- The probability distribution of returns for the two stocks X and Y are as follows: Probability 0.1 0.3 0.05 0.25 0.15 0.15 For each of the two stocks, calculate: a. The expected return. b. Variance of returns c. Volatility of returns. Stock X 0.05 -0.1 0.08 -0.08 0.20 0.12 Return Stock Y 0.13 0,04 -0.12 0.21 0.1 -0.05Stocks A, B, and C have the same expected return and standard deviation. The following table shows the correlation between the returns on these stocks. Stock A Stock B Stock C Stock A +1.0 Stock B +0.9 +1.0 Stock C +0.1 -0.4 +1.0 Given these correlations, the portfolio constructed from these stocks having the lowest risk is a portfolio: Equally invested in stocks A and B. Equally invested in stocks A and C. Equally invested in stocks B and C. Totally invested in stock C.Stock Y has a beta of 0.6 and an expected return of 8.89 percent. Stock Z has a beta of 2.1 and an expected return of 14.07 percent. What would the risk-free rate (in percent) have to be for the two stocks to be correctly priced relative to each other? Answer to two decimals.